June 11, 2019 / 8:37 PM / 16 days ago

CANADA FX DEBT-C$ dips as rally on expected Fed easing pauses

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.1% against the greenback
    * Price of U.S. oil rises 1 cent
    * Canada's 10-year yield touches an 11-day high at 1.543%

    By Fergal Smith
    TORONTO, June 11 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday, with the currency
extending its pullback from a three-month high the day before,
as a rally driven by more dovish expectations for the Federal
Reserve lost some momentum.
    At 4:02 p.m. (2002 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3284 to the greenback, or 75.28 U.S.
cents. The currency, which on Monday touched its strongest
intraday level since March 1 at 1.3226, traded in a range of
1.3251 to 1.3309.
    The loonie's rally ran "out of steam" ahead of 1.32 after
the currency had benefited from a sharp rise in expectations for
Federal Reserve interest rate cuts, said Greg Anderson, global
head of foreign exchange strategy at BMO Capital Markets in New
York.
    More gains for the Canadian dollar could come if the Fed
were to signal at next week's interest rate announcement that it
is going to ease in July and if oil prices start to recover,
Anderson said.
    Money markets see a greater than 80% chance that the Fed
will cut interest rates as soon as next month and are also
expecting at least one further cut before the end of the year.
              
    The decline for the loonie came as U.S. President Donald
Trump defended the use of tariffs as part of his trade strategy,
while China vowed a tough response if the United States insists
on escalating trade tensions amid ongoing negotiations.
            
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt by a
slowdown in the global flow of trade or capital.
    The price of oil was little changed as concerns about a
global economic slowdown offset expectations that OPEC and its
allies will extend their supply curbs. U.S. crude oil futures
       settled 1 cent higher at $53.27 a barrel.             
    Canadian government bond prices edged lower across a flatter
yield curve, with the two-year            down 3.5 Canadian
cents to yield 1.479% and the 10-year             falling 6
Canadian cents to yield 1.528%.    
    The 10-year yield touched its highest intraday since May 31
at 1.543%.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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