July 11, 2018 / 8:21 PM / 4 months ago

CANADA FX DEBT-C$ hits 9-day low as greenback rally counters BoC rate hike

 (Updates prices)
    * Canadian dollar at C$1.3208, or 75.71 U.S. cents
    * Bank of Canada hikes 25 basis points to 1.50 percent
    * Price of U.S. oil falls 5 percent
    * Bond prices mixed across flatter yield curve

    By Fergal Smith
    TORONTO, July 11 (Reuters) - The Canadian dollar weakened to
a more than one-week low against its U.S. counterpart on
Wednesday as broad-based gains for the greenback offset an
interest rate hike and the prospect of further tightening by the
Bank of Canada.
    The U.S. dollar        rose as the market put aside trade
tension fears and focused on an expectation-beating inflation
report, which increased prospects that the Federal Reserve will
raise interest rates two more times this year.             
    "This U.S. dollar move offsets and even more so the somewhat
hawkish BoC hike," said Greg Anderson, global head of foreign
exchange strategy at BMO Capital Markets in New York.
    The Bank of Canada raised its benchmark interest rate by 25
basis points to 1.50 percent, the fourth hike since last summer.
    It said mounting trade tensions with the United States would
have a larger impact on investment and exports than previously
thought, but it nudged up its estimate for second-quarter
economic growth and pointed to rising inflation pressures.
            
    "This should be consistent with a more firm pricing for
another hike this year," said Alvise Marino, FX strategist at
Credit Suisse in New York.
    Money markets see a nearly 70 percent chance of further
tightening by December.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.7 percent lower at C$1.3208 to the greenback, or 75.71
U.S. cents.
    The currency touched its strongest since June 14 at C$1.3064
and its weakest since July 2 at C$1.3215.
    Losses for the loonie came as the United States threatened
tariffs on an additional $200 billion worth of Chinese goods,
pressuring stocks and commodity prices.             
    Canada, which has its own trade dispute with the United
States, exports many commodities and runs a current account
deficit, so its economy could also be hurt if the flow of trade
or capital slows.
    U.S. crude oil futures        settled 5 percent lower
at$70.38 a barrel.      
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 2 Canadian cents
to yield 1.948 percent and the 10-year             rising 8
Canadian cents to yield 2.141 percent.
    The gap between the two-year yield and its U.S. equivalent
narrowed by 3.3 basis points to a spread of -62.6 basis points.

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