June 3, 2020 / 7:49 PM / a month ago

CANADA FX DEBT-Loonie notches 3-month high as BoC scales back crisis operations

 (Updates prices and details on productivity data)
    * Canadian dollar rises 0.2% against the greenback
    * Loonie touches a near 3-month high intraday at 1.3476
    * Bank of Canada holds policy rate at 0.25%
    * Canadian bond yields rise across a steeper curve

    By Fergal Smith
    TORONTO, June 3 (Reuters) - The Canadian dollar strengthened
to a three-month high against its U.S. counterpart on Wednesday
as investors bet on economic recovery and the Bank of Canada
reduced the frequency of some emergency operations it introduced
to support financial markets.
    The central bank held its key overnight interest rate steady
at a record low of 0.25% and said the impact of the coronavirus
pandemic on the global economy appeared to have peaked and the
Canadian economy seemed to have avoided worst-case projections.
            
    It said it would reduce the frequency of its term repo
operations to once per week, and its program to purchase
bankers' acceptances to bi-weekly operations.
    World shares          reached three-month highs as a closely
watched survey of service sector activity in China             
recovered to pre-epidemic levels in May.             
    Commodity-based currencies, such as the Canadian dollar,
"have tended to rally recently with just a better outlook of
increased growth coming out of the lockdowns," said Darcy
Briggs, a portfolio manager at Franklin Templeton Canada.
    The price of oil, one of Canada's major exports, rose to its
highest since March despite doubts about the timing and scale of
a potential extension to the oil supply pact among major
producers. U.S. crude oil futures        were up 0.5% at $37.01
a barrel.             
    The Canadian dollar        was trading 0.2% higher at 1.3490
to the greenback, or 74.13 U.S. cents. The currency touched its
strongest intraday level since March 9 at 1.3476. It has rallied
nearly 9% since hitting a four-year low in March.
    Canadian labor productivity grew by a record 3.4% in the
first quarter as hours worked fell more sharply than business
output because of lockdowns caused by the coronavirus pandemic,
Statistics Canada said.             
    Canadian government bond yields rose across a steeper yield
curve, with the 10-year yield             up 8.1 basis points at
0.623%.

 (Reporting by Fergal Smith; Editing by David Gregorio and Peter
Cooney)
  
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