May 15, 2019 / 8:55 PM / 2 months ago

CANADA FX DEBT-C$ rebounds from 6-day low, helped by metals tariffs optimism

 (Adds strategist quotes and details throughout; updates prices)
    * Canada's annual inflation rate edges up to 2.0% in April
    * Loonie touches its weakest intraday since May 9 at 1.3493
    * Price of U.S. oil rises 0.4%
    * Canada' 10-year yield hits lowest since April 1 at 1.633%

    By Fergal Smith
    TORONTO, May 15 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Wednesday, recovering from an
earlier six-day low as oil prices rose and investors grew more
optimistic that the United States would remove metals tariffs on
Canada.
    The United States is close to resolving a dispute over steel
and aluminum tariffs with Canada and Mexico, U.S. Treasury
Secretary Steven Mnuchin said as high-level American and
Canadian officials met to discuss trade issues.             
    "It is good for the Canadian dollar because it allows firms
to have greater confidence in cross-border supply channels,"
said Greg Anderson, global head of foreign exchange strategy at
BMO Capital Markets in New York.
    It shows that even if a new trade agreement between the
United States, Mexico and Canada does not get ratified that "the
U.S. and Canada will trade on friendlier terms," Anderson added.
    Canada sends about 75% of its exports to the United States,
including oil. Oil prices rose as worries that rising tensions
in the Middle East could hit global supplies overshadowed an
unexpected build in U.S. crude inventories.             
    U.S. crude oil futures        settled 0.4% higher at $62.02
a barrel, while stocks on Wall Street climbed as reports that
U.S. President Donald Trump would hold off on imposing tariffs
on imported cars and parts eased growth concerns, even as U.S.
and Chinese economic data disappointed investors.             
    At 4:21 p.m. (2021 GMT), the Canadian dollar          was
trading 0.2% higher at 1.3441 to the greenback, or 74.40 U.S.
cents. Earlier in the day the currency touched its weakest since
May 9 at 1.3493.
    Domestic data for April showed that home sales rose 3.6%
from the previous month and that the annual inflation rate edged
up to the Bank of Canada's target of 2.0% from 1.9% in March.
                        
    "We got a little reminder with the inflation data that
probably the Bank of Canada is not going to cut (interest
rates)," Anderson said.
    Chances of an easing this year were little changed on
Wednesday at less than 40%, the overnight index swaps market
indicated.           
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 4 Canadian cents to yield 1.583% and the 10-year
            climbed 28 Canadian cents to yield 1.663%.
    The 10-year yield touched its lowest intraday since April 1
at 1.633%.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and
Alistair Bell)
  
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