Canada FX Debt-Canadian Dollar Slides As Inflation Risk Hits Sentiment

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The Canadian dollar weakened to
a six-day low against its U.S. counterpart on Thursday, as
investors weighed inflation risk and awaited jobs data from both
the United States and Canada that could offer clues on central
bank policy outlooks.
World stock markets stepped back from record highs as rising
oil prices added to inflation concerns.
Oil       , one of Canada’s major exports, rose to its
highest level since October 2018 at $69.40 a barrel before
dipping below $69. It was supported by expectations for surging
fuel demand later this year while major producers maintain
supply discipline.
The Canadian dollar       , which has been on a tear this
year due to higher commodity prices and the Bank of Canada’s
more hawkish stance, was trading 0.6% lower at 1.2106 to the
greenback, or 82.60 U.S. cents. It touched its weakest intraday
level since last Friday at 1.2114.
The U.S. and Canadian employment reports for May are due on
Friday. Economists expect Canadian employment to fall by 20,000
in May after plunging 207,000 in April. Some provinces went into
lockdown in April to curb a harsh third wave of the COVID-19
pandemic.
Still, the Bank of Canada is seen tapering its asset
purchase program again next quarter and raising interest rates
earlier than previously predicted amid expectations for a robust
economic recovery after a recent downturn, a Reuters poll
showed.
The U.S. dollar        gained ground against a basket of
major currencies as a strong U.S. economic rebound threatened to
derail the assumption that interest rates will stay low for a
long time.
Canadian government bond yields were higher across much of a
steeper curve, tracking the move in U.S. Treasuries. The 10-year
was up 1.3 basis points at 1.508%.

– Reuters

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