October 26, 2018 / 1:26 PM / 25 days ago

CANADA FX DEBT-C$ sinks to 6-week low as oil, stock prices slide

    * Canadian dollar retreats 0.5 pct against the greenback
    * Price of U.S. oil falls 0.8 percent
    * Bond prices rise across the yield curve
    * Gap between 2- and 10-year yields hits narrowest in 11
years

    TORONTO, Oct 26 (Reuters) - The Canadian dollar weakened to
its lowest in more than six weeks against its U.S. counterpart
on Friday, as oil and stock prices declined and data showing
stronger-than-expected growth in the U.S. economy boosted the
greenback.
    World stocks slid lower and were set to post their biggest
weekly losing streak in more than five years, as anxiety over
corporate profits added to fears about global trade and economic
growth.             
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could suffer if the
flow of trade or capital slows.
    The price of oil headed for a third weekly loss after Saudi
Arabia warned of oversupply, while a slump in stock markets and
concerns about trade clouded the outlook for fuel demand.
            
    U.S. crude        prices were down 0.8 percent at $66.78 a
barrel.
    The U.S. dollar        neared a two-month high after the
U.S. Commerce Department reported that gross domestic product
increased at a 3.5 percent annualized rate in the third quarter.
            
    At 9:03 a.m. (1303 GMT), the Canadian dollar          was
trading 0.5 percent lower at 1.3141 to the greenback, or 76.10
U.S. cents. The currency's strongest level of the session was
1.3072, while it touched its weakest since Sept. 11 at 1.3154.
    For the week, the loonie was on track to decline 0.4 percent
despite an interest rate hike from the Bank of Canada.
    The central bank on Wednesday raised its key interest rate
by 25 basis points to 1.75 percent, its fifth hike since July
2017, and said it might speed up the pace of future hikes given
that the economy was running at almost full capacity and did not
need any stimulus.             
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. Core sovereign debt
markets have been boosted this week by demand for safe-haven
assets.
    The two-year            rose 4.5 Canadian cents to yield
2.289 percent and the 10-year             climbed 33 Canadian
cents to yield 2.412 percent.
    The gap between the two-year and 10-year yields narrowed by
1.7 basis points to a spread of 12.3 basis points, its smallest
since October 2007. 

 (Reporting by Fergal Smith; Editing by David Gregorio)
  
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