June 28, 2018 / 8:36 PM / in 2 months

CANADA FX DEBT-C$ gets boost from July rate hike bets, higher oil prices

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar at C$1.3266, or 75.38 U.S. cents
    * Chance of Bank of Canada July rate hike rises to 65 pct
    * Price of U.S. oil rises nearly 1 percent
    * Canadian bond prices move lower across the yield curve

    By Fergal Smith
    TORONTO, June 28 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Thursday, bolstered
by a 3-1/2 year high for oil prices and as investors added to
bets for a Bank of Canada interest rate hike next month.
    Chances of a rate increase at the July 11 announcement have
climbed to 65 percent from less than 50 percent before a press
conference on Wednesday by Bank of Canada Governor Stephen Poloz
that was more hawkish than a speech that had preceded it, data
from the overnight index swaps market showed.
                      
    "I think people are still talking about the Poloz comments
yesterday," said Win Thin, global head of emerging markets
strategy at Brown Brothers Harriman. "The price action speaks
for itself, the Canadian dollar is stronger."
    The shifting perception of July rate hike chances whipsawed
the Canadian dollar on Wednesday to a one-year low at C$1.3386
before it recovered ground.
    It was the second time in June that declines for the
currency had run out of steam just ahead of the C$1.34
threshold.
    "This could be a technical correction too for the loonie,"
Thin said.
    Investors are likely to pay close attention to the Bank of
Canada Business Outlook Survey and the April report for gross
domestic product, both due on Friday, after Poloz said the bank
is "data dependent, not headline dependent."
    The price of oil, one of Canada's major exports, was boosted
by supply concerns due to U.S. sanctions that could cause a
large drop in crude exports from Iran.             
    U.S. crude oil futures        settled nearly 1 percent
higher at $73.45 a barrel.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.5 percent higher at C$1.3266 to the greenback, or
75.38 U.S. cents. The currency touched its strongest since June
19 at C$1.3242.
    Gains for the loonie came as stocks on Wall Street rose,
shaking off recent worries about a trade dispute between the
United States and China.
    Canada has its own trade dispute with the United States and
is in slow-moving talks to revamp the North American Free Trade
Agreement.
    It will offer an aid package worth between C$500 million and
C$800 million to help steel and aluminum industries and workers
who have been hit by U.S. tariffs, a source familiar with the
matter said.                
    Canadian government bond prices were lower across the yield
curve, with the 10-year             falling 35 Canadian cents to
yield 2.134 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Marguerita Choy)
  
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