May 23, 2017 / 9:27 PM / 2 months ago

CANADA FX DEBT-C$ eases after touching nearly 1-month high, rates in focus

3 Min Read

    * Canadian dollar at C$1.3517, or 73.98 U.S. cents
    * Loonie touches its strongest since April 24 at C$1.3457
    * Longer term bond prices mostly lower across the yield
curve

    By Solarina Ho
    TORONTO, May 23 (Reuters) - The Canadian dollar eased
modestly against its U.S. counterpart on Tuesday after notching
a nearly one-month high earlier in the session, as the greenback
bounced from recent lows on expectations of a U.S. interest rate
hike in June.
    Traders were also awaiting the U.S. Federal Reserve's latest
policy-setting meeting minutes, due to be released on Wednesday,
for further clues on what the central bank may do at its June
meeting. 
    In Canada, the Bank of Canada is widely expected to hold
interest rates at 0.50 percent on Wednesday.
    At 4:00 p.m. EDT (2000 GMT), the Canadian dollar         
was trading at C$1.3517 to the greenback, or 73.98 U.S. cents,
down 0.1 percent.
    The currency's weakest level of the session was C$1.3525,
while it touched its strongest level since April 24 at C$1.3457.
    The U.S. dollar had been under pressure due to concerns that
U.S. President Donald Trump's economic stimulus plans would be
delayed amid political worries surrounding the administration. 
    The dollar index       , which tracks the U.S. currency
against six major rivals, was on track for its best day in two
weeks.
    Mark Chandler, head of Canadian fixed income and currency
strategy at RBC Capital Markets said the U.S. dollar's recent
struggles have helped the Canadian dollar.
    "I think that in the U.S. the Fed will become a little bit
more important as we go forward ... I can't see the U.S. dollar
getting much weaker from here," he said.
    Chandler says the loonie is likely to weaken again as the
Bank of Canada maintains a cautious tone in contrast to the Fed
and amid ongoing worries about an overheated Canadian housing
market. He expects the currency to trade around C$1.37 in the
second half of 2017, retreating to about C$1.40 by the end of
the year.
    Speculators have ramped up bearish bets on the Canadian
dollar to a record high, data from the Commodity Futures Trading
Commission and Reuters calculations showed on Friday. Canadian
dollar net short positions rose to 98,000 contracts as of May 16
from 86,215 a week earlier.             
    Canadian government bond prices were mixed across the yield
curve with longer term bond prices falling as the market
reopened following the Victoria Day holiday on Monday.
    The two-year            price was down 5.5 Canadian cents to
yield 0.703 percent, and the 10-year             fell 38
Canadian cents to yield 1.513 percent.

 (Reporting by Solarina Ho and Fergal Smith; Editing by Sandra
Maler)
  
 

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