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Loonie weakens amid risk currency moves will concern Bank of Canada

Published 2020-01-17, 04:20 p/m
© Reuters.  Loonie weakens amid risk currency moves will concern Bank of Canada
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* Canadian dollar falls 0.2% against the greenback

* Loonie ends 0.1% lower for the week

* Foreign investors sell Canadian securities in November

* Canadian bond prices trade mixed across a steeper yield curve

By Fergal Smith

TORONTO, Jan 17 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday, as the greenback broadly rose and investors saw risk that the Bank of Canada would remark on the loonie's recent appreciation at an interest rate decision next week.

The central bank is expected to leave its benchmark interest rate on hold at 1.75% next Wednesday, when it will also update its economic outlook.

"We do expect that the loonie may make an appearance in the statement with respect to how the CAD has appreciated versus other currencies," said Bipan Rai, North America head, FX strategy at CIBC Capital Markets.

A stronger Canadian dollar could reduce the competitiveness of Canada's exports, hurting the country's trade-dependent economy. The loonie climbed 5% against the U.S. dollar .DXY in 2019, helped by a strong finish to the year, while it notched even bigger gains against some other major currencies, such as the euro EUR= .

At 3:24 p.m. (2024 GMT), the Canadian dollar CAD=D4 was trading 0.2% lower at 1.3062 to the greenback, or 76.56 U.S. cents. The currency traded in a range of 1.3034 to 1.3076, while it was down 0.1% for the week.

The U.S. dollar .DXY gained ground against a basket of major currencies, buoyed by encouraging U.S. economic data, while U.S. crude oil futures CLc1 settled 2 cents higher at $58.54 a barrel. is one of Canada's major exports.

A revival in the Canadian economy may already be under way, according to a Reuters poll of economists, who were mostly confident a rate cut was not needed and so predicted monetary policy would remain unchanged this year. raised bullish bets on the Canadian dollar for the third straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Jan. 14, net long positions had increased to 32,852 contracts from 26,367 in the prior week.

Foreign investors sold a net C$1.75 billion in Canadian securities in November, led by private corporate instruments, following a revised C$11.32 billion total purchase in October, Statistics Canada said. government bond prices were mixed across a steeper yield curve, with the 10-year CA10YT=RR falling 14 Canadian cents to yield 1.570%.

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