June 8, 2018 / 9:16 PM / 2 months ago

CANADA FX DEBT-C$ rises as domestic wage gains boost BoC rate hike bets

 (Adds strategist quote, details on activity; updates prices)
    * Canadian dollar at C$1.2935, or 77.31 U.S. cents
    * Canadian jobs fall 7,500 jobs in May 
    * Price of U.S. oil falls 0.3 percent
    * Bond prices lower across steeper yield curve

    By Fergal Smith
    TORONTO, June 8 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Friday as data showing higher
domestic wages supported bets for a Bank of Canada interest rate
hike next month, even as consensus appeared to elude leaders at
a G7 summit. 
    The Canadian economy unexpectedly shed 7,500 jobs in May as
hiring declined in the manufacturing and construction sectors,
data from Statistics Canada showed. Economists had forecast a
gain of 17,500 jobs.    
    But wages rose at their strongest annual pace in nearly six
years, which could give the Bank of Canada room to raise
interest rates as soon as July.             
    Chances of a Bank of Canada interest rate hike next month
nudged up to 72 percent from 69 percent before the data, the
overnight index swaps market indicated.           
    "Ultimately what carried the day was the stronger than
expected wage number," said Eric Theoret, currency strategist at
Scotiabank.
    Economic fundamentals were more important for the market
than headlines coming from the G7, Theoret said.
    Expectations for any breakthroughs at the two-day Group of
Seven meeting in La Malbaie, Quebec, were low.             
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.3 percent higher at C$1.2935 to the greenback, or
77.31 U.S. cents. The currency traded in a range of C$1.2923 to
C$1.3040.
    Still, the loonie fell 0.6 percent for the week.
    Speculators have added to bearish bets on the Canadian
dollar, data from the U.S. Commodity Futures Trading Commission
and Reuters calculations showed. As of June 5, net short
positions rose to 16,039 contracts from 15,690 a week earlier.
    The price of oil, one of Canada's major exports, fell as
weakening demand in China and surging U.S. output weighed on
markets. U.S. crude        prices settled 0.3 percent lower at
$65.74 a barrel.                 
    Business leaders in the Canadian province of Ontario will
closely watch new premier-elect Doug Ford for signs the populist
conservative can deliver on his pledge to boost economic growth
and lower the cost of operating in the country's most populous
province.             
    Investors, who worry about the province's high debt load,
are also seeking details of the new government's fiscal plan.
             
    The gap between Ontario's 10-year yield and the equivalent
maturity Quebec bond narrowed by 1.3 basis points to a spread of
4.2 basis points.
    Canadian government bond prices were lower across a steeper
yield curve, with the 10-year             falling 28 Canadian
cents to yield 2.316 percent.

 (Reporting by Fergal Smith; Editing by Bill Trott and Sandra
Maler)
  
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