July 31, 2019 / 8:57 PM / 3 months ago

REFILE-CANADA FX DEBT-C$ hits a five-week low on hawkish Fed comments

 (Changes headline to correct spelling of "hits" and remove word
"against")
    * Canadian dollar falls 0.3% against the greenback
    * Canada's GDP grows by 0.2% in May
    * U.S. oil prices increase by 1%
    * Bond prices trade mixed across a flatter yield curve

    By Levent Uslu
    TORONTO, July 31 (Reuters) - The Canadian dollar weakened to
a more-than five-week low against the greenback on Wednesday, as
comments by the Federal Reserve that were seen by some investors
as hawkish offset domestic data showing stronger-than-expected
economic growth.
    The U.S. dollar        gained against a basket of currencies
after the Fed cut interest rates by 25 basis points as expected,
its first ease in more than a decade.
    Although rate cuts are intended to weaken the currency, the
greenback jumped as Fed Chair Jerome Powell during the
subsequent news conference called the cut a mid-cycle policy
adjustment, as opposed to the start of a rate-cutting cycle.
            
    "It has to be said that the market is viewing this as pretty
hawkish ... so it's no surprise that dollar-CAD is heading a bit
higher," said Christian Lawrence, a senior market strategist at
Rabobank.
    The downward move in the loonie came despite data showing
the Canadian economy grew 0.2% in May, beating estimates for
0.1% growth, thanks to a rebound in manufacturing.             
    Still, the high debt loads and depleted savings of Canadians
look set to crimp their spending for as long as decades,
economists say, with consumers already scaling back after
borrowing costs began to rise in 2017.              
    At 4:01 p.m. (2001 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3196 to the greenback, or 75.78 U.S.
cents. The currency hit its lowest intraday level since June 24
at 1.3214.
    Meanwhile, the price of oil, one of Canada's major exports, 
rose for a fifth day following a larger-than-expected drop in
U.S. inventories and after the Fed cut interest rates. U.S.
crude oil futures        settled 1% higher at $58.58 a barrel.
    Canadian government bond prices were mixed across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           fell 4.5 Canadian cents to yield 1.556% and the
10-year             was up 7 Canadian cents to yield 1.486%.

 (Reporting by Levent Uslu; 
Editing by Sandra Maler)
  
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