Forex Trading

CANADA FX DEBT-Canadian dollar hits 5-week low in risk-off trading -January 17, 2024 at 01:36 pm EST

* Canadian dollar falls 0.2% against the greenback

* Touches its weakest since Dec. 13 at 1.3541

* Price of U.S. oil drops 0.5%

* Canada 2-year yield climbs 14.4 basis points

TORONTO, Jan 17 (Reuters) – The commodity-linked
Canadian dollar weakened to a five-week low against its U.S.
counterpart on Wednesday as an investor rethink of Federal
Reserve interest rate cut prospects contributed to a sell off in
riskier assets.

The loonie was trading 0.2% lower at 1.3525 to the
greenback, or 73.94 U.S. cents, after touching its weakest
intraday level since Dec. 13 at 1.3541.

Canadian yields for shorter-dated bonds have matched the
move higher in U.S. Treasury yields which “suggests to us that
it is deteriorating risk conditions in the driving seat for the
loonie today,” Kyle Chapman, FX markets analyst at Ballinger &
Co in London, said in a note.

Canada is a major producer of commodities, including oil, so
the currency tends to be sensitive to shifts in investor

The safe-haven U.S. dollar added to recent gains against a
basket of major currencies and Wall Street’s main indexes
dropped after upbeat U.S. retail sales data tempered hopes of
the Fed kicking off its rate-cut campaign as early as March.

Inflation in Canada is likely to remain a bigger threat than
in the United States due to the high growth in Canadian wages
and shelter costs, which could see the central bank shifting to
interest rate cuts after the Federal Reserve, say analysts.

Still, domestic data showed producer prices falling by 1.5%
in December from November, the largest decline since August

U.S. crude oil futures were down 0.5% at $72.03 a
barrel as a shortfall in China’s economic growth compared to
expectations stoked worries about energy demand.

Canadian government bond yields rose across the curve. The
2-year was up 14.4 basis points at 4.050%, while the
gap between it and the U.S. equivalent was little changed at 32
basis points in favor of the U.S. note.
(Reporting by Fergal Smith; Editing by Kirsten Donovan)

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