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CANADA FX DEBT-C$ falls by most in 10 months as risk appetite sours

reuters.com · 06/09/2022 15:45
CANADA FX DEBT-C$ falls by most in 10 months as risk appetite sours

Adds strategist quotes and details throughout; updates prices

Canadian dollar falls 1.1% against the greenback

Touches its weakest since May 30 at 1.2698

Price of U.S. oil settles 0.5% lower

Canadian bond yields ease across curve

By Fergal Smith

- The Canadian dollar fell to a 10-day low against its broadly stronger U.S. counterpart on Thursday, as equity markets slid ahead of key data and despite the Bank of Canada leaving the door open to a three-quarter-percentage-point interest rate hike.

The Canadian dollar CAD= was trading 1.1% lower at 1.2695 to the greenback, or 78.77 U.S. cents, after touching its weakest since May 30 at 1.2698. It was the currency's biggest decline since August last year.

Wall Street's main indexes fell and the U.S. dollar .DXY rallied against a basket of major currencies as investors braced for a U.S. inflation report on Friday that could help determine the pace of Federal Reserve interest rate hikes.

"There is risk that sentiment sours a bit, which is not constructive for the Canadian dollar," said Mazen Issa, a senior FX strategist at TD Securities.

"U.S. CPI could be the catalyst because it is well understood that the year-over-year measure could peak but what is more important is the monthly price gains."

Bank of Canada Governor Tiff Macklem said inflation would dictate how fast Canadian interest rates go up, reiterating that the bank might need to make more increases in a row or consider a move larger than 50 basis points. nL1N2XW1H9

Money markets see a 40% chance that the central bank would hike by 75 rather than 50 basis points at the July 13 policy announcement. BOCWATCH

The price of oil, a major driver of inflation and one of Canada's major exports, eased back from three-month highs after parts of Shanghai imposed new COVID-19 lockdown measures. nL1N2XW023

U.S. crude CLc1 prices settled 0.5% lower at $121.51 a barrel, while Canadian government bond yields eased across the curve.

The 10-year CA10YT=RR fell 3.2 basis points to 3.240%, after earlier touching its highest since April 2011 at 3.310%.


(Reporting by Fergal Smith;
Editing by Alison Williams and Alistair Bell)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))