October 30, 2019 / 9:40 PM / 16 days ago

CANADA FX DEBT-Canadian dollar hits 2-week low as Bank of Canada takes dovish turn

 (Adds details throughout, updates prices)
    * Canadian dollar falls 0.5% against the greenback
    * Bank of Canada leaves policy rate steady at 1.75%
    * Loonie hits its weakest level since Oct. 17 at 1.3210
    * Canadian bond prices rally across the yield curve

    By Fergal Smith
    TORONTO, Oct 30 (Reuters) - The Canadian dollar weakened to
a near two-week low against the greenback on Wednesday as
expectations rose that the Bank of Canada would cut interest
rates after the central bank expressed greater concern about
global trade uncertainty.
    Canada's central bank held interest rates steady at 1.75% as
expected but left the door open to a possible cut over the
coming months to help the economy weather the damaging effects
of global trade conflicts.             
    "The loonie has sold off post-statement due to the fact that
the BoC is beginning to witness the effects of external
headwinds on the Canadian economy," said Simon Harvey, FX market
analyst for Monex Europe and Monex Canada.
    The central bank's "dovish stance" raises expectations for
policy easing, "especially if the economic data and external
climate deteriorates further," Harvey said.
    Money markets moved to fully price in a rate cut as early as
July. Before the announcement, chances of a cut next year were
seen at less than 50%.           
    At 4:51 p.m. (2051 GMT), the Canadian dollar          was
trading 0.5% lower at 1.3158 to the greenback, or 76.00 U.S.
cents. The currency touched its weakest intraday level since
Oct. 17 at 1.3210.    
    The U.S. dollar        fell against a basket of major
currencies after the Federal Reserve eased for the third time
since July but signaled no more reductions ahead.             
    The Fed's latest cut lowered the range for its policy rate
to below the Bank of Canada's equivalent rate for the first time
since December 2016.
    U.S. crude oil futures        settled 0.9% lower at $55.06 a
barrel after a steep U.S. crude inventory build added to worries
about a possible delay in resolving the U.S.-China trade war,
which has hurt global oil demand.             
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 29 Canadian cents to
yield 1.558% and the 10-year             rising 138 Canadian
cents to yield 1.452%.
    On Monday, the 10-year yield touched its highest intraday
level since July 16 at 1.628%.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
Cooney)
  
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