May 19, 2020 / 7:52 PM / 2 months ago

CANADA FX DEBT-Loonie climbs to 3-week high on rising hopes of economic recovery

    * Canadian dollar rises 0.3% against the greenback
    * Loonie touches its strongest since April 30 at 1.3867
    * Price of U.S. oil increases 1.7%
    * Canadian bond yields rise across a steeper curve

    By Fergal Smith
    TORONTO, May 19 (Reuters) - The Canadian dollar strengthened
to its highest in nearly three weeks against its U.S.
counterpart on Tuesday as oil prices rose and investors grew
more hopeful that the global economy would see signs of recovery
from the coronavirus crisis. 
    Canada runs a current account deficit and is a major
exporter of commodities, such as oil, so the loonie tends to be
sensitive to the global flow of trade and capital.
    Positive news on the development of a possible COVID-19
vaccine has supported "hopes for the reopening of global
economies," said Ronald Simpson, managing director, global
currency analysis at Action Economics.
    That has led to the reversal of some "safe-haven flows" into
the U.S. dollar, he said.
    The greenback        lost ground against a basket of major
currencies, while U.S. crude oil futures        were up 1.7%
amid signs that producers are cutting output as promised.
                        
    The Canadian dollar          was trading 0.3% higher at
1.3900 to the greenback, or 71.94 U.S. cents. The currency
touched its strongest intraday level since April 30 at 1.3867.  
  
    The gain for the loonie came as select retailers and auto
dealerships in Ontario, Canada's most populous province, opened
their doors to customers after two months of lockdown.
            
    Canada's inflation report for April is due on Wednesday,
with economists expecting the consumer price index to show an
annual decline of 0.1%. Bank of Canada Deputy Governor Timothy
Lane is also due to speak.
    Since March, the central bank has slashed interest rates to
near zero and begun its first ever large-scale bond buying
program.
    Canadian government bond yields rose across a steeper yield
curve on Tuesday, playing catch-up after Monday's Victoria Day
holiday. The 10-year yield             was up 6.4 basis points
at 0.606%.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and Dan
Grebler)
  
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