November 19, 2019 / 8:33 PM / 22 days ago

CANADA FX DEBT-Canadian dollar hits 6-week low as rate cut bets nudge higher

 (Adds strategist quote and details throughout, updates prices)
    * Canadian dollar weakens 0.4% against the greenback
    * Loonie touches its weakest level since Oct. 11 at 1.3272
    * Price of U.S. oil decreases by 3.2%
    * Canadian factory sales fall 0.2% in September

    By Fergal Smith
    TORONTO, Nov 19 (Reuters) - The Canadian dollar weakened to
a near six-week low against its U.S. counterpart on Tuesday
after a speech by a senior Bank of Canada official supported the
view that the central bank is moving closer to an interest rate
cut.
    Canada's financial system is in a relatively good place to
weather any potential storms generated by a weakening global
economy and the trade war between the United States and China,
Bank of Canada Senior Deputy Governor Carolyn Wilkins said.
            
    "The open-ended tone of Wilkins' remarks arguably pushed the
Bank slightly closer to the easing posture that's been adopted
by other key central banks in recent months," Don Curren, a
market strategist at Cambridge Global Payments, said in a note.
    Chances of a Bank of Canada interest rate cut as soon as
March rose to 64% from less than 60% before Wilkins' speech,
data from the overnight index swaps market showed.           
    In October, Canada's central bank shifted to a more dovish
stance as it cut its economic growth forecasts and expressed
concern about global trade uncertainty.             
    At 3:07 p.m. (2007 GMT), the Canadian dollar          was
trading 0.4% lower at 1.3264 to the greenback, or 75.39 U.S.
cents. The currency touched its weakest intraday level since
Oct. 11 at 1.3272.
    The decline for the loonie came as thousands of workers at
Canada's largest railway went on strike for the first time in a
decade, disrupting the shipping of commodities, and domestic
data showed monthly declines for factory sales and home
prices.                
    Canadian factory sales decreased by 0.2% in September,
hampered by partial shutdowns for maintenance at some
refineries, data from Statistics Canada showed.             
    The Teranet-National Bank Composite House Price Index fell
0.1% in October, weighed by seasonal pressures.                 
    Adding to headwinds for the loonie was a sharp drop in the
price of oil, one of Canada's major exports. U.S. crude oil
futures        settled 3.2% lower at $55.21 a barrel.
            
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 4.5 Canadian cents to
yield 1.517% and the 10-year             rising 33 Canadian
cents to yield 1.451%.
    The gap between Canada's 2-year yield and its U.S.
counterpart widened by 2.9 basis points to a spread of 8.1 basis
points in favor of the U.S. bond.
    Canada's inflation report for October is due on Wednesday,
while Bank of Canada Governor Stephen Poloz is due to speak on
Thursday on economic change.             

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Peter Cooney)
  
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