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CANADA FX DEBT-C$ slides by most in 2 months on hot U.S. inflation data

CANADA FX DEBT-C$ slides by most in 2 months on hot U.S. inflation data

Reuters · 09/13/2022 15:12
CANADA FX DEBT-C$ slides by most in 2 months on hot U.S. inflation data

Adds analyst quote and details throughout; updates prices

Canadian dollar weakens 1.2% against the greenback

Posts its biggest decline since July 5

Price of U.S. oil settles 0.5% lower

2-year yield touches its highest since December 2007

By Fergal Smith

- The Canadian dollar on Tuesday posted its biggest decline in more than two months against the greenback as U.S. inflation data bolstered bets that the Federal Reserve would continue to raise interest rates aggressively.

Wall Street tumbled and the U.S. dollar .DXY jumped against a basket of major currencies after hotter-than-expected U.S. consumer price data dashed hopes that the Fed could relent and scale back its policy tightening in the future.

"Over the summer, the market grow comfortable with 4% terminal rates in North America, but the latest round of inflation data hints that might be enough," said Adam Button, chief currency analyst at ForexLive.

Money markets priced in a terminal rate, or peak level for rates, year of about 4.25% in the United States and 4% in Canada. 0#FEDWATCH0#BOCWATCH

The price of oil, one of Canada's major exports, reversed earlier gains, with U.S. crude futures CLc1 settling down 0.5% at $87.31 a barrel.

The Canadian dollar CAD= was trading 1.2% lower at 1.3145 to the greenback, or 76.07 U.S. cents, its biggest decline since July 5.

Earlier in the day, it touched its strongest level in three weeks at 1.2955.

Meanwhile, Canadian Prime Minister Justin Trudeau announced C$4.5 billion ($3.43 billion) in measures intended to provide relief from high inflation to low-income families.

Canadian government bond yields were sharply higher across the curve, tracking the move in U.S. Treasuries.

The 2-year CA2YT=RR touched its highest since December 2007 at 3.778% before dipping slightly to 3.763%, up 16 basis points on the day. The 10-year CA10YT=RR was up 7 basis points at 3.214%.


(Reporting by Fergal Smith; editing by Jonathan Oatis)

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