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CANADA FX DEBT-C$ hits 18-month low as Fed disappoints Wall St

ForexDec 19, 2018 16:20
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© Reuters. CANADA FX DEBT-C$ hits 18-month low as Fed disappoints Wall St

* Canadian dollar falls 0.1 percent against greenback

* Canada's annual inflation rate falls to 1.7 percent

* U.S. oil prices rally 2.1 percent

* Bond prices rise across a flatter yield curve

* Canada's 10-year yield falls below 2 percent

By Fergal Smith

TORONTO, Dec 19 (Reuters) - The Canadian dollar weakened to a 1-1/2-year low against the greenback on Wednesday, pressured by softer-than-expected domestic inflation data and further declines on Wall Street as the Federal Reserve again raised interest rates.

At 3:53 p.m. (2053 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent lower at 1.3488 to the greenback, or 74.14 U.S. cents. The currency touched its weakest level since June 2017, at 1.3507.

"There really isn't a strong catalyst for reversal here, basically in a situation where equities continue to fall under pressure," said Mazen Issa, senior FX strategist at TD Securities. "CAD retains a bit of sensitivity to the overall equity dynamic."

Stocks fell after the Fed delivered its fourth hike of 2018, as expected. Though the central bank forecast fewer rate hikes next year in the face of financial market volatility and slowing global growth, it fell short of investors' hopes of a more dovish monetary policy. exports many commodities, including oil, and runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.

Lower gas prices pulled Canada's annual inflation rate in November down to 1.7 percent, the first time in 10 months it has been below the Bank of Canada's 2.0 percent target, Statistics Canada data indicated. Analysts had forecast the rate would fall to 1.8 percent from 2.4 percent in October. slowdown in inflation indicates that the Bank of Canada can be "less hurried to raise rates," Issa said.

Chances of a Bank of Canada interest rate hike in March dropped to 13 percent from 17 percent before the data, the overnight index swaps market showed. Bets on further tightening had already been slashed after a dovish policy announcement earlier this month from the central bank. BOCWATCH loonie lost ground on Wednesday even as the price of oil recovered somewhat from a sharp selloff during the previous session. U.S. crude oil futures CLc1 settled 2.1 percent higher at $47.20 a barrel. government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 5 Canadian cents to yield 1.895 percent and the 10-year CA10YT=RR climbed 38 Canadian cents to yield 1.971 percent.

The 10-year yield touched its lowest level since Dec. 20, 2017, at 1.949 percent.

CANADA FX DEBT-C$ hits 18-month low as Fed disappoints Wall St
 

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