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CANADA FX DEBT-C$ dips on tame inflation; speculators' bets swing bearish
March 24, 2017 / 9:31 PM / 6 months ago

CANADA FX DEBT-C$ dips on tame inflation; speculators' bets swing bearish

 (Adds analyst quotes and details on CFTC data and updates
prices)
    * Canadian dollar ends at C$1.3380, or 74.74 U.S. cents
    * Bond prices higher across flatter yield curve
    * 10-year yield touches a three-week low at 1.621 percent

    By Fergal Smith
    TORONTO, March 24 (Reuters) - The Canadian dollar weakened
on Friday against its U.S. counterpart as tame domestic
inflation dampened pressure on the Bank of Canada to turn more
hawkish, while CFTC data showed a sharp swing by speculators to
bearish bets against the loonie.
    Canada's annual inflation rate dipped to 2.0 percent in
February from 2.1 percent in January. Analysts in a Reuters poll
had expected the rate to remain at 2.1 percent.             
    Three new measures established by the Bank of Canada late
last year showed core inflation below its target of 2 percent.
    After recent robust domestic data, tame inflation "cools"
market expectations for the central bank to move toward a more
neutral stance, said Jimmy Jean, senior economist at Desjardins.
    As recently as January, Bank of Canada Governor Stephen
Poloz said an interest rate cut remained on the table. The
central bank last cut in July 2015 to leave its policy rate at
0.50 percent.
    Poloz is due to speak next week. He will be in "a more
comfortable position" to argue that there is still a lot of
excess capacity and the central bank is nowhere near hiking
rates, Jean said.
    Speculators turned the most bearish on the Canadian dollar
since March 2016, data from the Commodity Futures Trading
Commission and Reuters calculations showed. Canadian dollar
positions swung sharply to net short 24,403 contracts as of
March 21 from net long 21,458 contracts a week earlier.        
    The Canadian dollar          ended at C$1.3380 to the
greenback, or 74.74 U.S. cents, weaker than Thursday's close of
C$1.3351, or 74.90 U.S. cents.
    The currency traded in a range of C$1.3348 to C$1.3385.
    For the week the loonie fell 0.3 percent.
    Prices of oil, one of Canada's major exports, were boosted
by hopes that an OPEC output cut was beginning to balance a long
oversupplied market.             
    U.S. crude        prices settled 27 cents higher at $47.97 a
barrel.    
    U.S. President Donald Trump's administration approved
TransCanada Corp's          Keystone XL pipeline, which would
bring more than 800,000 barrels of heavy crude per day from
Canada's oil sands to U.S. refineries and ports along the Gulf
of Mexico.             
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year            up 4 Canadian cents to
yield 0.751 percent and the 10-year             rising 39
Canadian cents to yield 1.641 percent.
    The 10-year yield touched its lowest intraday since Feb. 28
at 1.621 percent.

 (Reporting by Fergal Smith; Editing by Paul Simao and James
Dalgleish)
  
 

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