CANADA FX DEBT-C$ Plunges as Short Covering Propels Greenback Widely Higher

(Adds quotes and strategist details throughout; updates pricing) * Loonie plunges 0.1% against greenback * US oil price settles 1.6% lower * Canadian 10-year yield hits 14-month high of 1.545% By Fergal Smith TORONTO, March 8 (Reuters) – The Canadian dollar fell slightly against its U.S. counterpart on Monday, but fared better than most of other G10 currencies as the United States moved closer to enacting fiscal stimulus and ahead of a Bank of Canada interest rate decision on Wednesday. The loonie was trading down 0.1% at 1.2666 against the greenback, or 78.95 cents US. “We saw some defensiveness against the loonie,” said Bipan Rai, head of North American currency strategy at CIBC Capital Markets. “It’s like the market is closing short in US dollars.” The safe-haven US dollar hit a 3.5-month high against a basket of major currencies as high yields on US Treasuries spooked investors. Pressure on the loonie was less than on some other currencies because Canadian yields kept pace with the recent rise in U.S. yields and oil rallied, Rai said. Besides the greenback, the only other G10 currency to gain ground against the Canadian dollar on Monday is the Norwegian krone. The US Senate passed the stimulus package on Saturday and President Joe Biden said he hoped the revised bill would pass quickly through the House of Representatives. Canada sends about 75% of its exports to the United States, including oil. Oil settled down 1.6% to $65.05, returning some recent gains, after Saudi Arabia said there had been no property losses from attacks against its oil installations. Investors see increasing odds of the Bank of Canada raising interest rates next year as the economic outlook improves, but the central bank is likely to push back on those bets for now, indicating a Unemployment still high, analysts say. The Canadian 10-year rate hit its highest level since January last year at 1.545% before falling to 1.521%, up 1.9 basis points on the day. (Reporting by Fergal Smith Editing by Marguerita Choy and Jonathan Oatis)

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