December 4, 2018 / 9:00 PM / 10 days ago

CANADA FX DEBT-C$ falls ahead of BoC rate decision as trade optimism ebbs

 (Adds strategist comment and details throughout; updates
prices)
    * Canadian dollar falls 0.4 percent against the greenback
    * Price of U.S. oil rises 0.6 percent
    * Canadian bond prices rise across a flatter yield curve
    * Canada's 10-year yield falls to a 4-1/2-month low

    By Fergal Smith
    TORONTO, Dec 4 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday, paring some of its gains from
the prior day as investors awaited a Bank of Canada interest
rate decision and grew skeptical of the chances of a
breakthrough in U.S.-China trade talks.
    News of a 90-day truce in the trade war between the United
States and China helped boost the loonie on Monday, as investors
grew more optimistic on the outlook for the global economy.
    But stocks fell on Tuesday as optimism faded over a speedy
resolution to the trade conflict and a flattening U.S. Treasury
yield curve set off warning lights about slowing growth.
            
    The Bank of Canada has worried that the U.S.-China trade
dispute is weighing on global growth and commodity prices.
    Money markets and a strong majority of economists polled by
Reuters expect the central bank to leave its benchmark interest
rate unchanged at 1.75 percent on Wednesday, after it hiked the
rate in October for the fifth time since July 2017.
                      
    Investors are reluctant to make bets on the loonie ahead of
the interest rate decision and a meeting on Thursday of the
Organization of the Petroleum Exporting Countries, said Simon
Harvey, a currency market analyst for Monex Europe and Monex
Canada.        
    The price of oil, one of Canada's major exports, pared gains
in volatile trading as fears flared that demand would stall due
to the U.S.-China trade war, and that Russia remained a
stumbling block to a deal to cut global crude supply.
            
    U.S. crude oil futures        settled 0.6 percent higher at
$53.25 a barrel.
    At 3:34 p.m. (2034 GMT), the Canadian dollar          was
trading 0.4 percent lower at 1.3247 to the greenback, or 75.49
U.S. cents.
    The currency, which on Monday touched its strongest in
nearly two weeks at 1.3160, traded in a range of 1.3164 to
1.3258.
    Canadian labor productivity grew by 0.3 percent in the third
quarter, reflecting a slowdown in business output from the
previous quarter, while hours worked edged up, Statistics Canada
said.                  
    Canada's trade report for October is due on Thursday and the
November employment report is due on Friday.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The 10-year
            climbed 42 Canadian cents to yield 2.186 percent.
    The 10-year yield touched its lowest intraday since July 20
at 2.168 percent.

 (Reporting by Fergal Smith; editing by Bernadette Baum and
Jonathan Oatis)
  
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