December 7, 2018 / 2:40 PM / 4 days ago

CANADA FX DEBT-C$ jumps as jobs data, oil rally bolster rate-hike bets

    * Canadian dollar rises 0.6 percent against greenback
    * Canada adds a record 94,100 jobs in November
    * Price of U.S. oil rises 4.2 percent
    * Canadian bond prices fall across flatter yield curve
    * Gap between 2- and 10-year yields narrows to 7.3 basis
points

    By Fergal Smith
    TORONTO, Dec 7 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Friday as higher oil prices and
data showing a record increase in domestic jobs bolstered
expectations for further interest rate hikes from the Bank of
Canada.
    Expectations for rate hikes had moderated this week after
the Bank of Canada left rates on hold on Wednesday and fretted
about the impact on the economy of a sharp drop in the price of
oil, one of Canada's major exports, since October.
    "We still have to deal with the coming negative hit to the
economy from Alberta's production cuts in Q1 (first quarter), so
I think that's going to remain the Bank of Canada's focus," said
Derek Holt, vice president of capital markets economics at
Scotiabank. "But at the margin if we keep getting numbers like
this, it could well keep the bank on track to hiking."
    Chances of a rate hike in March rose to 43 percent from 33
percent before the employment data.           
    At 9:20 a.m. (1420 GMT), the Canadian dollar          was
trading 0.6 percent higher at 1.3304 to the greenback, or 75.17
U.S. cents.
    The currency, which Thursday hit its lowest in nearly 18
months at 1.3445, traded in a range of 1.3285 to 1.3400.
    The Canadian economy added 94,100 jobs in November on higher
full-time hiring, and the unemployment rate dipped to a new
all-time low of 5.6 percent, Statistics Canada said. Economists
had forecast a jobs gain of 11,000.             
    Oil prices jumped as big Middle East producers in the
Organization of the Petroleum Exporting Countries agreed to
reduce output to drain global fuel inventories and support the
market.      
    U.S. crude        prices were up 4.2 percent at $53.67 a
barrel.
    The U.S. dollar        erased gains against a basket of
major currencies after data showed U.S. job growth slowed in
November and monthly wages increased less than expected,
suggesting some moderation in economic activity that could
support expectations of fewer interest rate increases from the
Federal Reserve in 2019.              
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            price down 8.2
Canadian cents to yield 2.036 percent and the benchmark 10-year
            falling 14 Canadian cents to yield 2.109 percent.
    The gap between Canada's 2-year yield and its 10-year yield
narrowed by 2.8 basis points to a spread of 7.3 basis points,
its narrowest since September 2007.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)
  
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