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Fergal Smith

CANADA FX DEBT-C$ retreats from 9-month high as consumers lose their pep

20 Jul 2019

(Adds market player quotes and details; updates prices) * Canadian dollar falls 0.3% against the greenback * Canadian retail sales decline 0.1% in May * U.S. oil futures increase by 0.6% * Canada-U.S. 2-year spread widens by 3.9 basis points By Fergal Smith TORONTO, July 19 The Canadian dollar weakened against its U.S. counterpart on Friday, pulling back from a near nine-month high hit earlier in the day, as domestic data showed a surprise decline in May retail sales and the greenback broadly climbed. The value of Canadian retail trade dipped by 0.1% versus an estimated 0.3% increase, as unusually bad weather hit sales of food, drink and clothing. "The report casts some doubt on the resiliency of the consumer sector to the ongoing parade of worrisome geopolitical and trade developments," Ryan Brecht, a senior economist at Action Economics, said in a research note. Canada's economy has showed signs of picking up in the second quarter after a slowdown at the turn of the year, even as a more uncertain outlook for trade has weighed on the global economy. The U.S. dollar rose against a basket of currencies as fears of a larger-than-expected 50-basis-point interest rate cut in July abated after the New York Federal Reserve downplayed dovish comments from its president on Thursday. "There has been a generalized rebound in the dollar and Canada has been affected by that, too," said Alvise Marino, a foreign exchange strategist at Credit Suisse in New York. At 4:10 p.m. (2010 GMT), the Canadian dollar was trading 0.3% lower at 1.3060 to the greenback, or 76.57 U.S. cents. The currency's weakest level of the session was 1.3110, while it touched its strongest since Oct. 25, at 1.3016. For the week, the loonie was down 0.2%. The Canadian dollar lost ground on Friday even as the price of oil, one of Canada's major exports, rose. U.S. crude oil futures settled 0.6% higher at $55.63 a barrel on rising tensions between the United States and Iran. Still, speculators have raised bullish bets on the currency to the highest since March 2018, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of July 16, net long positions in the loonie rose to 20,964 contracts from 9,226 contracts in the prior week. Canadian government bond prices dipped across much of the yield curve, with the 10-year falling 2 Canadian cents to yield 1.502%. The 10-year yield touched its lowest intraday level since July 5 at 1.485%, while the gap between Canada's 2-year yield and its U.S. equivalent widened by 3.9 basis points to a spread of 36.2 basis points in favor of the U.S. bond. (Reporting by Fergal Smith; additional reporting by Levent Uslu; Editing by Leslie Adler)

UPDATE 1-Bank of Canada to take over administration of reference rate for swaps

16 Jul 2019

TORONTO, July 16 The Bank of Canada announced on Tuesday its intention to become the administrator of the Canadian Overnight Repo Rate Average (CORRA), a reference rate for financial market transactions, when enhancements to CORRA take effect next year.

CANADA FX DEBT-C$ nears 8-month high on diverging U.S. and Canadian rate outlooks

12 Jul 2019

(Adds strategist quote and details throughout; updates prices) * Canadian dollar rises 0.1% against the greenback * Canadian new home prices dip 0.1% in May * Price of U.S. oil decreases 0.4% * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, July 11 The Canadian dollar firmed against its U.S. counterpart on Thursday, approaching last week's eight-month high, as investors focused on the less-dovish policy guidance coming from the Bank of Canada compared with that of the Federal Reserve. At 4:16 p.m. (2016 GMT), the Canadian dollar was trading 0.1% higher at 1.3062 to the greenback, or 76.56 U.S. cents. The currency, which last Thursday notched an eight-month high at 1.3038, traded in a range of 1.3042 to 1.3080. The outlook for the U.S. dollar remained grim after Federal Reserve Chair Jerome Powell's bleak comments on the U.S. economy, which bolstered expectations of an interest rate cut later this month. In contrast, the Bank of Canada made clear on Wednesday it had no intention of easing monetary policy even as it highlighted the risks that trade wars posed to the global economy. "If you look at the relative monetary policy, Canada versus the U.S., it still looks like divergence," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. Chances of an interest rate cut this year by the Bank of Canada were less than 35%, data from the overnight index swaps market showed. Over the same period, the market expects at least two rate cuts from the Fed. The price of oil, one of Canada's major exports, fell as OPEC forecast slower demand for its crude next year. U.S. crude oil futures settled 0.4% lower at $60.20 a barrel. New home prices in Canada declined 0.1% in May, after prices were flat for the previous three months, Statistics Canada said. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries, after data showed U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June. The two-year fell 3 Canadian cents to yield 1.602% and the 10-year was down 35 Canadian cents to yield 1.623%. (Reporting by Fergal Smith; Additional reporting by Levent Uslu; Editing by Peter Cooney)

CANADA FX DEBT-Loonie climbs as BoC policy outlook diverges from the Fed

11 Jul 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.4% against the greenback * Bank of Canada leaves its policy rate on hold at 1.75% * Price of U.S. oil increases 4.5% * Canada's yield curve steepens By Fergal Smith TORONTO, July 10 The Canadian dollar strengthened against its broadly weaker U.S. counterpart on Wednesday, moving closer to last week's eight-month high, as the Bank of Canada showed no sign that it would match potential interest rate cuts from the U.S. Federal Reserve. The Bank of Canada left its benchmark interest rate on hold at 1.75% as expected and made clear it had no intention of easing monetary policy, while highlighting the risks trade wars posed to the global economy. Meanwhile, Fed Chairman Jerome Powell reinforced expectations the U.S. central bank will cut interest rates for the first time in a decade at its next monetary policy meeting later this month, saying trade uncertainties and concerns about the global outlook continued to exert pressure on the American economy. It's a "contrasting story of central bank prospects," said Shaun Osborne, chief currency strategist at Scotiabank. "It seems quite possible that we are going to get a pretty meaningful series of interest rate reductions from the Fed going forward here, and the Bank of Canada, in contrast, is suggesting that to a large extent it is going to sit this one out." While chances of an interest rate cut this year by the Bank of Canada rose to 35% from 20% before the interest rate announcement, that fell well short of expected tightening over the same period by the Fed. Investors see at least two Fed rate hikes by December. At 4:21 p.m. (2021 GMT), the Canadian dollar was trading 0.4% higher at 1.3080 to the greenback, or 76.45 U.S. cents. The currency, which last Thursday touched an eight-month high at 1.3038, traded in a range of 1.3063 to 1.3145. Adding to support for the loonie, the price of oil, one of Canada's major exports, was boosted by data showing U.S. crude inventories shrank and as major producers cut nearly a third of offshore Gulf of Mexico production ahead of an expected storm. U.S. crude oil futures settled up 4.5% at $60.43 a barrel. Canada's yield curve steepened in sympathy with the U.S. curve. The two-year rose 10.5 Canadian cents to yield 1.583% and the 10-year was flat to yield 1.584%. (Reporting by Fergal Smith; editing by David Gregorio, Bernadette Baum and Jonathan Oatis)

Bank of Canada may diverge from dovish peers as economy rebounds

10 Jul 2019

OTTAWA/TORONTO, July 10 The Bank of Canada on Wednesday looks set to raise its second-quarter economic growth forecast and stand pat on interest rates, taking a different tack from some major peers, which are signaling plans for additional stimulus.

CANADA FX DEBT-Loonie hits one-week low on risk of dovish shift by BoC

10 Jul 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar falls 0.2% against the greenback * Canadian housing starts surge in June * Price of U.S. oil increases 0.3% * Canada's 10-year yield touches a five-week high at 1.594% By Fergal Smith TORONTO, July 9 The Canadian dollar weakened to an eight-day low against its U.S. counterpart on Tuesday as the greenback broadly climbed and investors saw potential for the Bank of Canada to try to slow the currency's recent rally. The loonie has been the top-performing G10 currency this year as Canada's economy showed signs of picking up in recent months and traders bet that Bank of Canada Governor Stephen Poloz would cut interest rates at a slower pace than the Federal Reserve. "There could still be some trade-related threats for Canada and on that basis he (Poloz) may just want to cool down the market," said Amo Sahota, a director at Klarity FX in San Francisco. A stronger loonie could make Canada's exports less competitive, hurting the country's economy. The U.S. dollar gained against a basket of major currencies as investors reassessed their expectations of how much the Fed may cut interest rates this month. Fed Chief Jerome Powell is due to testify before Congress on Wednesday. The price of oil, one of Canada's major exports, was supported by Middle East tensions and OPEC supply cuts. U.S. crude oil futures settled 0.3% higher at $57.83 a barrel. At 4:14 p.m. (2014 GMT), the Canadian dollar was trading 0.2% lower at 1.3129 to the greenback, or 76.17 U.S. cents. The currency touched its weakest intraday level since July 1 at 1.3141. Speculators have turned bullish on the Canadian dollar for the first time since March 2018, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Monday. As of July 2, there were 6,293 contracts net long the loonie, a swing from 14,790 contracts net short the currency in the prior week. Canadian housing starts rose much more than expected in June, to a seasonally adjusted annualized rate of 245,657 units, the Canadian Mortgage and Housing Corp (CMHC) said. Separate data from Statistics Canada showed that the value of building permits fell by 13% in May from April, largely due to the value of permits in British Columbia returning to recent levels following a surge in April. Canadian government bond prices were higher across a steeper yield curve, with the two-year up 6 Canadian cents to yield 1.640% and the 10-year rising 1 Canadian cent to yield 1.579%. The 10-year yield touched its highest intraday since May 30 at 1.594%. (Reporting by Fergal Smith; Additional reporting by Levent Uslu; Editing by Peter Cooney)

CANADA FX DEBT-C$ dips on Fed testimony uncertainty, BoC rate decision due Wednesday

09 Jul 2019

(Adds strategist quote and details throughout, updates prices) * Canadian dollar weakens 0.1% against the greenback * Price of U.S. oil increases 0.3% * Canadian bond prices trade mixed across a flatter yield curve * Canada-U.S. 2-year spread hit its narrowest since January 2018 By Fergal Smith TORONTO, July 8 The Canadian dollar edged lower against its U.S. counterpart on Monday as the greenback broadly gained, but the loonie held near last week's eight-month high ahead of an interest rate decision on Wednesday from the Bank of Canada. The U.S. dollar hovered at a three-week high against a basket of major currencies as traders awaited Fed Chairman Jerome Powell's testimony this week before Congress for clues about a rate decrease. "The reason the dollar is up against most majors, the Canadian dollar in particular, is just that there are these concerns about what Fed Chairman Powell will say this week," said Alfonso Esparza, senior currency analyst at OANDA. Data on Friday showing a stronger-than-expected increase in U.S. jobs in June has scaled back traders' expectations of a sharp Fed rate cut at the end of July. At 2:55 p.m. (1855 GMT), the Canadian dollar was trading 0.1% lower at 1.3094 to the greenback, or 76.37 U.S. cents. The currency, which on Thursday touched its strongest since Oct. 25, last year at 1.3038, traded in a range of 1.3050 to 1.3100. Canada's employment report was also released on Friday. It showed that wages jumped in June by the most in more than a year - a sign of strength analysts said ruled out the chances of the Bank of Canada cutting interest rates this week. The central bank will keep its key interest rate on hold at 1.75% through to the end of next year at least, according to a Reuters poll, diverging from expected easing from the U.S. Federal Reserve. Canadian government bond prices were mixed across a flatter yield curve, with the two-year price down 8 Canadian cents to yield 1.668% and the 10-year rising 4 Canadian cents to yield 1.567%. The gap between Canada's 2-year yield and its U.S. counterpart narrowed by 4.6 basis points to a spread of 20.4 basis points in favor of the U.S. bond, its smallest gap since January 2018. The price of oil, one of Canada's major exports, was supported by tensions over Iran's nuclear program but gains were tempered by global economic growth concerns. U.S. crude oil futures settled 0.3% higher at $57.66 a barrel. (Additional reporting by Levent Uslu Editing by Nick Zieminski and Sandra Maler)

CANADA FX DEBT-C$ pulls back from 8-month high as investors reweigh Fed outlook

06 Jul 2019

(Adds strategist quotes and details throughout, updates prices) * Canadian dollar weakens 0.2% against the greenback * Canada's economy sheds 2,200 jobs in June * Price of U.S. oil increases 0.3% * Canadian bond prices decline across the yield curve By Fergal Smith TORONTO, July 5 The Canadian dollar weakened against its U.S. counterpart on Friday, pulling back from an eight-month high the day before, as the greenback broadly climbed and after data showed a surprise drop in Canadian jobs in June. The U.S. dollar gained against a basket of currencies after an unexpectedly strong U.S. payrolls report that caused investors to rethink how dovish a turn the Federal Reserve may take. "It's a 'big dollar' story," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. "The dollar has gained against everything, and the least against CAD." Other than the U.S. dollar, the loonie was the best performing G10 currency. Canada's economy shed a net 2,200 jobs in June after two months of gains, but wages jumped by the most in more than a year - a sign of strength analysts said ruled out the chances of the Bank of Canada cutting interest rates next week. "The headline number was a little weak but all the details were good," Anderson said. Chances that the central bank would cut rates this year slipped to about 15% from 25% before the jobs report, the overnight index swaps market indicated. In separate domestic data, the seasonally adjusted Ivey Purchasing Managers Index fell to its lowest since February at 52.4 from 55.9 in May. At 3:15 p.m. (1915 GMT), the Canadian dollar was trading 0.2% lower at 1.3081 to the greenback, or 76.45 U.S. cents. The currency, which on Thursday notched an eight-month high at 1.3038, traded in a range of 1.3045 to 1.3136. For the week, the loonie was nearly unchanged. The Canadian dollar will edge higher against the greenback over the coming year, as a recovering domestic economy forestalls Bank of Canada interest rate cuts despite expected easing from the U.S. Federal Reserve, a Reuters poll predicted. The price of oil, one of Canada's major exports, was supported on Friday by tensions over Iran and a decision by OPEC and its allies to extend an output supply cut deal until next year. U.S. crude oil futures settled 0.3% higher at $57.51 a barrel. Canadian government bond prices were sharply lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 18.5 Canadian cents to yield 1.623% and the 10-year was down 101 Canadian cents to yield 1.576%. The 10-year yield touched its highest intraday since May 30 at 1.582%. (Reporting by Fergal Smith; editing by Jonathan Oatis)

Loonie to stay firm in a year so long as Bank of Canada lags U.S. rate cuts

05 Jul 2019

TORONTO The Canadian dollar will edge higher against the greenback over the coming year, as a recovering domestic economy forestalls Bank of Canada interest rate cuts despite expected easing from the U.S. Federal Reserve, a Reuters poll predicted.

CANADA FX DEBT-C$ steadies near 8-month high ahead of domestic jobs data

05 Jul 2019

(Adds dealer quotes and details throughout; updates prices) * Loonie touches an eight-month high at 1.3038 per U.S. dollar * Price of U.S. oil falls 0.9% * Canadian government bond prices dip across a flatter yield curve By Fergal Smith TORONTO, July 4 The Canadian dollar was little changed against its U.S. counterpart on Thursday, holding near an earlier eight-month high which was notched after a number of recent data releases pointed to a pick up in the domestic economy. At 3:25 p.m. (1925 GMT), the Canadian dollar was trading nearly unchanged at 1.3055 to the greenback, or 76.60 U.S. cents. The currency touched its strongest level since Oct. 25, last year at 1.3038, while its weakest was 1.3079. The narrow range for the currency came as markets were closed in the United States for the Independence Day holiday. "There is certainly decent momentum for the Canadian dollar given the string of strong and somewhat surprising data," said Michael Goshko, a corporate risk manager at Western Union Business Solutions. Data last Friday showed faster-than-expected growth in Canada's economy in April, while a report on Wednesday showed a surprise swing in the May trade balance to surplus. Canada's jobs report for June is due on Friday. "Until the data begins to really soften in Canada, the BoC is going to be standing pat as far as the eye can see ... that's certainly at odds with what is going on in the United States." Money markets see about a 20% chance of an interest rate cut this year from the Bank of Canada, down from about 50% two weeks ago. The central bank will next week make an interest rate decision and revise its growth forecasts for the economy. The Federal Reserve has signaled that it could ease rates as early as this month due to growing risks to the U.S. economy, especially related to the trade war between Washington and Beijing, and low inflation. The loonie notched an eight-month high even as the price of oil, one of Canada's major exports, was weighed down by data showing a smaller-than-expected draw on U.S. crude stockpiles along with worries about the global economy. U.S. crude oil futures were down 0.9% at $56.80 a barrel. Canadian government bond prices were lower across a flatter yield curve, with the two-year down 4 Canadian cents to yield 1.520% and the 10-year falling 10 Canadian cents to yield 1.466%. The 10-year yield fell 1.2 basis points further below the 2-year yield to a negative spread of 5.4 basis points. On Friday, that part of the curve inverted for the first time since August 2007. (Reporting by Fergal Smith; Editing by Sandra Maler)

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