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CANADA FX DEBT-C$ jumps to 4-month high as Poloz raises prospects of July hike
June 28, 2017 / 2:03 PM / in 4 months

CANADA FX DEBT-C$ jumps to 4-month high as Poloz raises prospects of July hike

    * Canadian dollar at C$1.3097, or 76.35 U.S. cents
    * Loonie touches its strongest since Feb. 24 at C$1.3076
    * Chances of a rate hike in July rise to 45 percent
    * Bond prices lower across the yield curve

    By Fergal Smith
    TORONTO, June 28 (Reuters) - The Canadian dollar
strengthened to a 4-month high on Wednesday against its U.S.
counterpart, boosted by comments by Bank of Canada Governor
Stephen Poloz that raised expectations of an interest rate hike
as early as next month.
    Interest rate cuts made in 2015 have done their job and the
Bank of Canada needs to consider its options at its upcoming
interest rate decision as excess capacity is used up, Poloz said
in a CNBC interview in Europe.             
    That's a pretty solid signal that a July rate hike is very
much on the table, Benjamin Reitzes, senior economist at BMO
Capital Markets, said in a research note.
    Chances of a rate hike next month rose to 45 percent from 30
percent on Tuesday, data from the overnight index swaps market
showed.           
    At 9:44 a.m. ET (1344 GMT), the Canadian dollar          was
trading at C$1.3097 to the greenback, or 76.35 U.S. cents, up
0.8 percent.
    The currency's weakest level of the session was C$1.3198,
while it touched its strongest since Feb. 24 at C$1.3076.
    Strengthening of the loonie could pressure speculators to
further reduce bearish bets on the currency, which had reached a
record high in May.
    Speculators cut bearish bets on the loonie for a fourth
straight week, data from the U.S. Commodity Futures Trading
Commission and Reuters calculations showed on Friday. Canadian
dollar net short positions fell to 82,881 contracts as of June
20 from 88,595 a week earlier.    
    Prices of oil, one of Canada's major exports, edged lower
after an industry report said U.S. inventories increased. U.S.
crude        prices were down 0.16 percent at $44.17 a
barrel.                
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 7.5 Canadian cents to
yield 1.023 percent and the 10-year             falling 38
Canadian cents to yield 1.614 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed by 4.6 basis points to a spread of -34.2
basis points, its narrowest since Nov. 14, as Canadian
government bonds underperformed.
    Canada's gross domestic product data for April and the Bank
of Canada's business outlook report are due on Friday.          

 (Reporting by Fergal Smith; Editing by Nick Zieminski)
  
 

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