November 28, 2018 / 9:16 PM / 20 days ago

CANADA FX DEBT-C$ rebounds from 5-month low as investors rethink Fed outlook

 (Adds investor quotes and details throughout; updates prices)
    * Canadian dollar rises 0.3 percent against the greenback
    * Loonie touches its weakest since June 27 at 1.3360
    * Price of U.S. oil falls 2.5 percent
    * Canada's 10-year yield hits lowest in more than two months

    By Fergal Smith
    TORONTO, Nov 28 (Reuters) - The Canadian dollar rallied
against its broadly weaker U.S. counterpart on Wednesday,
rebounding from an earlier five-month low after comments from
Federal Reserve Chairman Jerome Powell that were seen as dovish
by some investors.
    Powell appeared to signal the U.S. central bank was nearing
an end to its interest-rate hikes, saying the Fed's policy rate
was now "just below" a level that neither brakes nor boosts a
healthy economy.             
    "Today's move (in the Canadian dollar) is a result of
changing expectations around the Federal Reserve," said Tim Alt,
director, rates & currencies at Aviva Investors in Chicago.
    Yields on shorter-dated U.S. government bonds fell and the
U.S. dollar        retreated against a basket of major
currencies.
    At 3:51 p.m. (2051 GMT), the Canadian dollar          was
trading 0.3 percent higher at 1.3263 to the greenback, or 75.40
U.S. cents. The currency's strongest level of the session was
1.3242, while it touched its weakest since June 27 at 1.3360.
    Gains for the loonie came despite a 13-month low for the
price of oil, one of Canada's exports.
    U.S. crude oil futures        settled 2.5 percent lower at
$50.29 a barrel after U.S. crude inventories rose for the 10th
straight week amid concerns about excess global supply.
            
    Recent weakening in oil prices, including the price of
Canadian heavy crude, have weighed on the outlook for Canada's
economy, reducing expectations for another Bank of Canada
interest rate hike in January, Alt said.
    The central bank has hiked five times since July 2017 to
leave its benchmark interest rate at 1.75 percent. Chances of
further tightening as soon as January have slipped to about 70
percent after having been fully priced into the market at the
beginning of the month, data from the overnight index swaps
market showed.           
    Alberta is in talks to buy rail cars to transport 120,000
barrels per day (bpd) of crude oil and expects a deal to
conclude within weeks, Premier Rachel Notley said, as the
energy-rich province takes actions to move oil stuck in the
region because of a lack of pipeline capacity.             
    Canadian government bond prices were higher across much of a
steeper yield curve in sympathy with U.S. Treasuries. The
two-year            rose 3.5 Canadian cents to yield 2.208
percent and the 10-year             climbed 11 Canadian cents to
yield 2.325 percent.
    The 10-year yield hit its lowest intraday since Sept. 13 at
2.313 percent.

 (Reporting by Fergal Smith; Editing by Susan Thomas and Peter
Cooney)
  
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