July 12, 2019 / 8:33 PM / 2 months ago

CANADA FX DEBT-C$ posts 9-month high as investors focus on rate divergence

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar rises 0.3% against the greenback
    * For the week, the loonie was up 0.4%
    * Price of U.S. oil increases 1 cent
    * Canada's 10-year yield touches a 7-week high at 1.649%

    By Levent Uslu
    TORONTO, July 12 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Friday, adding to
this week's gains, driven by a less dovish interest rate outlook
from the Bank of Canada compared with the Federal Reserve.
    Canada's central bank on Wednesday left its benchmark
interest rate steady at 1.75% and made clear it had no intention
of easing monetary policy. That stance has contrasted with
dovish guidance this week from the Fed.             
    Investors are betting that the Fed will cut interest rates
at the end of this month and ease further by October.
                    
    The loonie was lifted by "divergence" in monetary policy
between the Bank of Canada and the Fed, said Bipan Rai, North
American head of FX strategy at CIBC Capital Markets.
    At 4:01 p.m. (2001 GMT), the Canadian dollar          was
trading 0.3% higher at 1.3031 to the greenback, or 76.74 U.S.
cents. The currency touched its strongest intraday level since
Oct. 25 at 1.3018.
    For the week, the loonie was up 0.4%. It has climbed 4.7%
since the start of the 2019, the best performance among G10
currencies.
    Gains for the loonie this week came as data from the U.S.
Commodity Futures Trading Commission and Reuters calculations
showed that speculators have raised bullish bets on the
currency. As of July 9, net long positions in the loonie rose to
9,226 contracts from 6,293 contracts in the prior week.
    "In the longer term, we think that any strength in the
Canadian dollar will provide better opportunities to fade, but
that's something that we're going to need to be patient on," Rai
said.       
    The price of oil, one of Canada's major exports, was little
changed as U.S. oil producers in the Gulf of Mexico cut more
than half their output because of a tropical storm and as
tensions continued to simmer in the Middle East.               
    U.S. crude oil futures        settled 1 cent higher at
$60.21 a barrel.
    Canadian government bond prices were higher across the yield
curve, with the 2-year up 4.5 Canadian cents to yield 1.579% and
the 10-year             rising 21 Canadian cents to yield
1.607%.
    Earlier in the day, the 10-year yield touched its highest
since May 24 at 1.649%.

 (Reporting by Levent Uslu; additional reporting by Fergal
Smith; editing by Jonathan Oatis)
  
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