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CANADA FX DEBT-C$ tracks oil higher; Poloz indicates high bar to cut

Published 2016-11-28, 05:03 p/m
© Reuters.  CANADA FX DEBT-C$ tracks oil higher; Poloz indicates high bar to cut
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(Adds analyst quotes and details on comments by Bank of Canada Governor Stephen Poloz, updates prices)

* Canadian dollar ends at C$1.3421, or 74.51 U.S. cents

* Loonie touches its strongest since Nov. 22 at C$1.3397

* Bond prices higher across a flatter yield curve

By Fergal Smith

TORONTO, Nov 28 (Reuters) - The Canadian dollar strengthened to a nearly one-week high against its U.S. counterpart on Monday as oil rallied ahead of a meeting of major oil producers, while Bank of Canada Governor Stephen Poloz indicated a high bar to cut interest rates.

U.S. crude CLc1 prices settled up $1.02 at $47.08 a barrel, recouping losses in a volatile session as the market reacted to the shaky prospect of the Organization of the Petroleum Exporting Countries being able to agree to output cuts at a meeting on Wednesday. O/R

"I almost feel sorry for the dollar-Canada traders because they are literally getting whipped around by one OPEC headline after another," said Michael Goshko, corporate risk manager at Western Union Business Solutions.

Oil is on of Canada's major exports.

It would take a significant disruption to the Bank of Canada's outlook on inflation for the bank to consider more stimulus, Poloz said. central bank considered a cut last month before holding its policy rate steady at 0.50 percent. It last cut in July 2015.

The Canadian dollar CAD=D4 ended at C$1.3421 to the greenback, or 74.51 U.S. cents, stronger than Friday's close of C$1.3527, or 73.93 U.S. cents.

The currency's weakest level of the session was C$1.3537, while it touched its strongest since Nov. 22 at C$1.3397.

Poloz will give a speech on Monday evening at the C.D. Howe Institute in Toronto. His prepared remarks were to be released at 7:45 p.m. EST (0045 on Tuesday GMT).

The governor of Canada's central bank is likely to be pressed on what the Nov. 8 U.S. election of Donald Trump means for Canada, particularly its export sector, which has long been key to the central bank's outlook.

"When someone talks about rewriting trade agreements, with the huge orientation of our economy towards exports, specifically to the United States, we're a bit of a sitting duck," Goshko said.

Trump has said he wants to renegotiate the North American Free Trade Agreement (NAFTA).

The market is underestimating the prospect of further interest rate cuts from the Bank of Canada, some economists said, as an uncertain outlook for NAFTA risks derailing an expected pickup in Canada's business spending. government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR bond rose 1.5 Canadian cents to yield 0.663 percent and the benchmark 10-year CA10YT=RR climbed 40 Canadian cents to yield 1.523 percent.

Last week, the 10-year yield touched an 11-month high at 1.614 percent.

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