February 13, 2019 / 9:54 PM / 5 months ago

CANADA FX DEBT-C$ reverses from one-week high as greenback rallies

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar falls 0.2 percent against the greenback
    * Loonie touches its strongest intraday since Feb. 6 at
1.3197
    * Price of U.S. oil climbs 1.5 percent
    * Canadian home prices fall for fourth straight month in
January
    * Canadian bond prices decline across the yield curve

    By Fergal Smith
    TORONTO, Feb 13 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday, pulling back from an
earlier one-week high, after the release of U.S. inflation data
that prompted some investors to bet that the Federal Reserve
could raise interest rates further.
    The U.S. dollar rose against a basket of major currencies,
reverse the prior day's decline, after a measure of inflation
excluding energy prices rose.             
    "We are seeing a little bit of dollar strength here," said
Erik Nelson, a currency strategist at Wells Fargo. "We had some
solid CPI numbers this morning, and maybe some very slight
increase in speculation that the Fed is not done here."
    Higher U.S. interest rates could reduce the attractiveness
of buying lower-yielding Canadian bonds.     
    The gap between Canada's two-year yield and its U.S.
equivalent widened by 1.6 basis points to a spread of 72 basis
points in favor of the U.S. bond.
    At 4:38 p.m. (2138 GMT), the Canadian dollar          was
trading 0.2 percent lower at 1.3256 to the greenback, or 75.44
U.S. cents. The currency touched its strongest level intraday
since Feb. 6 at 1.3197.
    The one-week high for the loonie came as U.S. stocks were
boosted by hopes the United States and China can iron out a
trade deal.             
    A U.S.-China deal could boost prospects for Canada's economy
as a major producer of commodities, including oil. 
    U.S. crude oil futures        settled 1.5 percent higher at
$53.90 a barrel on Wednesday, as Saudi Arabia said it would cut
crude exports and deliver an even deeper cut to its production.
            
    Canadian home prices fell 0.1 percent in January, the fourth
consecutive month of decline, led by weakness in major Western
Canadian cities, the Teranet-National Bank Composite House Price
Index showed.             
    Canadian government bond prices were lower across the yield
curve in sympathy with Treasuries. The two-year            fell
3.7 Canadian cents to yield 1.818 percent and the 10-year
            declined 14 Canadian cents to yield 1.935 percent.

 (Reporting by Fergal Smith
Editing by Tom Brown)
  
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