April 30, 2019 / 9:10 PM / 3 months ago

CANADA FX DEBT-Loonie notches one-week high as Poloz dials back pessimism

 (Adds investor quote and details throughout; updates prices)
    * Canadian dollar rises 0.5% against the greenback
    * Canada's economy shrinks 0.1% in February
    * Price of U.S. oil increases 0.7%
    * Canada-U.S. 10-year spread narrows by 2.1 basis points

    By Fergal Smith
    TORONTO, April 30 (Reuters) - The Canadian dollar climbed to
a one-week high against a broadly weaker greenback on Tuesday,
boosted by higher oil prices and upbeat comments by Bank of
Canada Governor Stephen Poloz, but the currency lost ground in
April for the third straight month.
    At 4:38 p.m. (2038 GMT), the Canadian dollar          was
trading 0.5% higher at 1.3391 to the greenback, or 74.68 U.S.
cents.
    The currency touched its strongest level since April 23 at
1.3382. For April, the loonie was down 0.3%, following declines
in February and March but a strong performance in January.   
    The Canadian economy faces some headwinds but there was good
reason to believe growth would accelerate in the second half of
this year, Poloz told the House of Commons finance committee.
            
    "Poloz, today in his testimony, definitely walked back some
of the pessimistic sentiment that was embedded in their previous
rate statement," said Scott Smith, managing partner at Viewpoint
Investment Partners.
    Last week, the Bank of Canada held interest rates steady at
1.75 percent as it slashed its gross domestic product growth
forecast for the year to 1.2 percent from 1.7 percent in
January.                 
    Canada's central bank is buying time for the economy to exit
a soft patch without the aid of lower interest rates, economists
say, by forecasting growth so weak it would take a surprise blow
to activity for the economy to undershoot its estimates.
            
    Canada's gross domestic product fell by 0.1 percent in
February from January, data showed on Tuesday, falling short of
analysts' estimates of no change.             
    The price of oil, one of Canada's major exports, rose as
Venezuela's opposition leader called on the military to back him
to end Nicolas Maduro's rule. U.S. crude oil futures       
settled up 0.7% at $63.91 a barrel.                 
    The U.S. dollar        fell against a basket of major
currencies ahead of a Federal Reserve interest rate decision on
Wednesday, as data showing stronger-than-expected first-quarter
growth numbers for the euro zone boosted the euro.             
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries, with the 10-year
            rising 9 Canadian cents to yield 1.713%.
    The gap between Canada's 10-year yield and its U.S.
equivalent narrowed by 2.1 basis points to a spread of 79.2
basis points in favor of the U.S. bond.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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