May 28, 2019 / 8:00 PM / 6 months ago

CANADA FX DEBT-C$ slides as investors flee for safe-haven currencies

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar falls 0.4% against the greenback
    * Price of U.S. oil increases 0.9%
    * Canada's 10-year yield hits a nearly two-month low at
1.563%

    By Fergal Smith
    TORONTO, May 28 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday as the greenback broadly
climbed, but the loonie stayed within its recent range ahead of
a Bank of Canada interest rate decision on Wednesday.
    The U.S. dollar        rose against a basket of major
currencies as trade tensions drove investors to buy safe-haven
currencies and as political risks in Europe weighed on the euro.
            
    "I'm just seeing your typical broad (U.S.) dollar-buying
type of flow whenever you see stocks come off," said Erik
Bregar, head of FX strategy at the Exchange Bank of Canada. A
lack of progress in the trade dispute between the United States
and China has worried investors, he said.
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt by a
slowdown in the global flow of trade.
    The price of oil increased on Tuesday after flooding
throughout the Midwest constrained crude flow from the main U.S.
storage hub in Cushing, Oklahoma. U.S. crude oil futures       
settled 0.9% higher at $59.14 a barrel.             
    At 3:34 p.m. (1934 GMT), the Canadian dollar          was
trading 0.4% lower at 1.3490 to the greenback, or 74.13 U.S.
cents. The currency, which has spent much of the last month
between 1.34 and 1.35, traded in a range of 1.3434 to 1.3497.   
    The Bank of Canada is widely expected to leave its benchmark
interest rate unchanged on Wednesday at 1.75% as it weighs
developments in household spending, oil markets and global trade
policy.             
    Recent data, including a record high monthly jobs gain in
April, could make the central bank more confident in its
projection that the domestic economy will pick up in the second
half of the year, Bregar said.    
    The central bank, which has kept the policy rate on hold
since October after having tightened by 125 basis points since
July 2017, has forecast faster growth over the coming months
after what it expects was barely any growth in the first three
months of the year. Canada's first-quarter gross domestic
product data is due on Friday.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The 10-year
            climbed 25 Canadian cents to yield 1.574%. The yield
touched its lowest intraday since March 29 at 1.563%.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Leslie Adler)
  
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