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CANADA FX DEBT-C$ hits 2-week low even as investors eye 75 bps rate hike

reuters.com · 06/10/2022 10:02
CANADA FX DEBT-C$ hits 2-week low even as investors eye 75 bps rate hike

Canadian dollar weakens 0.7% against the greenback

Touches weakest since May 26 at 1.2787

Canadian economy adds 40,000 jobs in May

Canadian bond yields trade mixed across flatter curve

- The Canadian dollar fell against its broadly stronger U.S. counterpart on Friday as investors weighed Canadian employment and U.S. inflation data that supported bets for aggressive interest rate hikes by the Bank of Canada and the Federal Reserve.

The loonie CAD= was trading 0.7% lower at 1.2785 to the greenback, or 78.22 U.S. cents, after touching its weakest since May 26 at 1.2787. For the week, it was on track to fall 1.5%, which would be its biggest weekly decline since last August.

The U.S. dollar .DXY jumped against a basket of major currencies and equity markets globally .WORLD tumbled as U.S. consumer prices accelerated in May, suggesting the Fed could continue with its 50 basis point interest rate hikes through September to combat inflation. nL1N2XW25Z

Canada's central bank has also been hiking in half-percentage-point increments.

Money markets see about a 60% chance that it would announce an even larger move at its next policy announcement on July 13 as data showed the Canadian economy adding 40,000 jobs in May, more jobs than expected, and the unemployment rate hitting a record low at 5.1%. nL1N2XX10C

The price of oil CLc1, one of Canada's major exports, dipped 0.4% on Friday to $121.06 a barrel but was on track for another weekly gain, supported by solid fuel demand in the United States. nL1N2XX04J

Canadian government bond yields were mixed across a flatter curve. The 2-year rate CA2YT=RR rose 6.4 basis points to 3.138%, while the 10-year CA10YT=RR was little changed at 3.263%.

On Thursday, the Government of Canada canceled an ultra-long bond issue planned for next week, saying the decision reflects the country's declining borrowing needs.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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