Jan 10, 2018
Loonie recovers as rate hike prospects outweigh NAFTA fears
Reuters
,The Canadian dollar rose against a broadly weaker greenback on Thursday, rebounding from a nearly two-week low earlier in the session as prospects of a Bank of Canada interest rate hike next week offset worries about a U.S. withdrawal from NAFTA.
At 4 p.m. ET, the Canadian dollar was trading at $1.2527 to the greenback, or 79.83 cents US, up 0.2 per cent. It touched its weakest intraday since Dec. 29 at $1.2590.
The United States must be taken seriously when it says it might walk away from the North American Free Trade Agreement, Canada's foreign minister said, a day after government sources said Ottawa was increasingly convinced U.S. President Donald Trump would pull the plug on the trade pact.
"A series of reports and denials on the future of NAFTA has the market off balance at the moment," said Adam Button, currency analyst at ForexLive in Montreal. "Traders are weighing the NAFTA news against the likelihood of a Bank of Canada rate hike next week."
Chances of a rate hike on Jan. 17 steadied around 70 per cent after having fallen on Wednesday, data from the overnight index swaps market showed. They reached nearly 90 per cent on Monday, boosted by recent much stronger-than-expected domestic jobs data.
"In the bigger picture the U.S. dollar is weak today and that has taken a bit of pressure off the Canadian dollar," Button said. The U.S. dollar fell against a basket of major currencies after the European Central Bank said it could revisit its policy message in early 2018, boosting the euro.
The price of oil reached its highest in three years on signs of tightening supply in the United States. U.S. crude oil futures settled 0.4 per cent higher at US$63.80 a barrel.
Canadian new home prices edged up 0.1 per cent in November from October, boosted by gains in Ottawa, data from Statistics Canada showed. Prices were unchanged in a number of other markets, including the major city of Toronto.
Canadian government bond prices were mixed across the yield curve, with the two-year up 1.1 cents to yield 1.758 per cent and the 10-year falling 2 cents to yield 2.166 per cent. On Wednesday, the 10-year yield reached its highest intraday since September 2014 at 2.231 per cent.