July 23, 2019 / 2:41 PM / 4 months ago

CANADA FX DEBT-C$ hits 1-month low as debt limit deal boosts greenback

    * Canadian dollar weakens by 0.3% against the greenback
    * Price of U.S. oil rises by 0.1%
    * Bond prices trade mixed across the yield curve
    * Canada-U.S. 10-year spread widens by 3.8 basis points

    By Levent Uslu
    TORONTO, July 23 (Reuters) - The Canadian dollar weakened to
a near one-month low against its U.S. counterpart on Tuesday, as
the greenback broadly climbed and after recent domestic data
supported the view that the Bank of Canada could cut interest
rates this year.
    Since Friday, domestic data for May has showed a surprise
decline in both retail sales and wholesale trade.
                        
    "Headwinds for the Canadian dollar appear to be intensifying
as market participants reassess the outlook for relative central
bank policy in light of domestic data disappointments and
constructive political developments out of Washington,"
Scotiabank strategists said in a research note.
    Chances of a Bank of Canada interest rate cut this year have
climbed to more than 50% from about 20% before the Bank of
Canada interest rate decision earlier this month.           
    The central bank left its benchmark interest rate unchanged
at 1.75% but highlighted the risks that trade wars posed to the
global economy.             
    The U.S. dollar        rose to a two-week high versus its
rivals after U.S. President Donald Trump and congressional
leaders agreed a two-year extension of the debt limit, dousing
fears of a government default later this year.             
    At 9:20 a.m. (1320 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3152 to the greenback, or 76.03 U.S.
cents. The currency, which touched its lowest intraday level
since June 26 at 1.3164, has pulled back from a near nine-month
high on Friday at 1.3016.
    Meanwhile, the price of oil, one of Canada's major exports,
was little changed on Tuesday as easing tensions in the Middle
East dimmed supply disruption concerns. U.S. crude oil futures
       prices rose 0.1% to $56.28 a barrel.                
    Canadian government bond prices were mixed across the yield
curve, with the two-year            flat to yield 1.438% and the
10-year             rising 10 Canadian cents to yield 1.475%.
    The 10-year yield touched its lowest intraday since July 4
at 1.454%, while the gap between the 10-year yield and its U.S.
counterpart widened by 3.8 basis points to a spread of 59.5
basis points in favor of the U.S. bond, the biggest gap since
June 19.

 (Reporting by Levent Uslu
Editing by Susan Thomas)
  
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