January 31, 2018 / 10:25 PM / 10 months ago

CANADA FX DEBT-C$ posts 4-month high, pares some gains after Fed decision

 (Adds dealer quotes and details on Fed decision and Trudeau
comments, updates prices)
    * Canadian dollar at C$1.2300, or 81.30 U.S. cents
    * Loonie touches its strongest since Sept. 20 at C$1.2250
    * Currency rises 2.3 percent in January
    * 2-year yield touches its highest in 6-1/2 years

    By Fergal Smith
    TORONTO, Jan 31 (Reuters) - The Canadian dollar rose to a
four-month high against its U.S. counterpart on Wednesday,
boosted by data showing strong growth in Canada's economy, but
some gains were pared as investors weighed the U.S. Federal
Reserve interest rate decision.
    At 4 p.m. (2100 GMT), the Canadian dollar          was
trading 0.3 percent higher at C$1.2300 to the greenback, or
81.30 U.S. cents.
    The currency touched its strongest level since Sept. 20 at
C$1.2250. For the month, the loonie rose 2.3 percent.
    Canadian gross domestic product rose by 0.4 percent in
November from October, Statistics Canada said. The increase was
in line with economists' expectations and the biggest gain since
May 2017.             
    "The loonie will go as the big dollar (U.S. dollar) goes,
unless we see not just strong Canadian data but Herculean
Canadian data," said Brad Schruder, director of corporate sales
and structuring at BMO Capital Markets. "The market doesn't
believe it (the data) is enough to move the needle for the Bank
of Canada."
    Chances of a rate hike at the central bank's next meeting in
March were little changed after the data at about 25 percent,
the overnight index swaps market indicated.           
    The central bank has raised interest rates three times since
July. Its benchmark rate sits at 1 percent.
    The U.S. dollar        rebounded against a basket of major
currencies after the Fed kept interest rates unchanged but said
it anticipated inflation would rise this year, a sign it is
still on track to raise borrowing costs in March.             
    Canadian Prime Minister Justin Trudeau said he did not think
U.S. President Donald Trump would pull out of the North American
Free Trade Agreement, despite slow progress at negotiations to
update the $1.2 trillion trade pact.             
    Canada sends about 75 percent of its exports to the United
States.    
    U.S. crude        prices settled 0.4 percent higher at
C$64.73 a barrel. Oil is one of Canada's major exports.
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 1.5 Canadian
cents to yield 1.839 percent and the 10-year             rising
4 Canadian cents to yield 2.289 percent.
    The two-year yield touched its highest point since June 2011
at 1.849 percent.

    
 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter
Cooney)
  
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