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CANADA FX DEBT-C$ hits a 6-week low as stocks slide; losses pared

ForexOct 26, 2018 16:20
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© Reuters. CANADA FX DEBT-C$ hits a 6-week low as stocks slide; losses pared

(Adds strategist quotes and details on activity; updates prices)

* Canadian dollar retreats 0.1 pct against the greenback

* Loonie touches its weakest since Sept. 11 at 1.3160

* Bond prices rise across flatter yield curve

* Gap between 2- and 10-year yields hits narrowest in 11 years

By Fergal Smith

TORONTO, Oct 26 (Reuters) - The Canadian dollar slumped to a six-week low against its U.S. counterpart on Friday before paring its decline, as a sell-off in global stock markets offset the boost the loonie got earlier in the week from a Bank of Canada interest rate hike.

Stock markets around the world fell as better-than-expected U.S. economic data did little to ease anxiety over disappointing corporate profits and trade wars. runs a current account deficit and exports many commodities, so its economy could suffer if the flow of trade or capital slows.

"It has been quite choppy," said Andrew Kelvin, senior rates strategist at TD Securities. "This very negative sentiment around equities combined with the fact that you've had this hawkish surprise from the Bank of Canada, it creates counteracting influences on Canadian fixed income and on the currency."

Canada's central bank on Wednesday raised its key interest rate by 25 basis points to 1.75 percent, its fifth hike since July 2017, and said it might speed up the pace of future hikes given that the economy was running at almost full capacity and did not need any stimulus. 3:46 p.m. (1946 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent lower at 1.3082 to the greenback, or 76.44 U.S. cents. The currency touched its weakest intraday level since Sept. 11 at 1.3160.

For the week, the loonie was up 0.1 percent.

Speculators have cut bearish bets on the Canadian dollar to the lowest since March, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Oct. 23, net short positions had decreased to 7,228 contracts from 11,019 a week earlier.

The price of oil, one of Canada's major exports, was supported by expectations that sanctions on Iran would tighten global supplies. U.S. crude oil futures CLc1 settled 0.4 percent higher at $67.59 a barrel. government bond prices were higher across the yield curve in sympathy with U.S. Treasuries, as the sell-off in stocks boosted demand for safe-haven government debt. two-year CA2YT=RR rose 9 Canadian cents to yield 2.266 percent and the 10-year CA10YT=RR climbed 51 Canadian cents to yield 2.391 percent.

The gap between the two-year and 10-year yields narrowed by 1.5 basis points to a spread of 12.5 basis points, its smallest since October 2007.

CANADA FX DEBT-C$ hits a 6-week low as stocks slide; losses pared
 

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