Canadian dollar adds to losses on dovish Bank of Canada

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Thursday, adding to losses from the day before, when the Bank of Canada held interest rates steady and tempered expectations for a hike early next year.

The central bank struck a more dovish tone than investors had expected after very strong employment data on Friday.

Still, the Canadian dollar is likely to strengthen over the coming year, a Reuters poll showed, on assumptions that uncertainty over trade lifts and a stronger economy boosting inflation will prompt the Bank of Canada to resume raising rates.

At 9:39 a.m. ET (1439 GMT), the Canadian dollar <CAD=D4> was down 0.5 percent at C$1.2847 to the greenback, or 77.84 U.S. cents.

The currency, which touched its weakest since Friday at C$1.2860, lost ground despite firm domestic data and a higher price of oil, one of Canada's major exports.

U.S. crude <CLc1> prices rose 0.7 percent to $56.37 a barrel.

The value of Canadian building permits increased 3.5 percent in October from September, more than economists had expected, on increased plans for commercial and residential construction.

The U.S. dollar <.DXY> reached a two-week high against a basket of currencies on optimism that the United States will push through a tax overhaul.

Canadian government bond prices were higher across the yield curve, with the two-year <CA2YT=RR> up 1.5 Canadian cents to yield 1.481 percent and the 10-year <CA10YT=RR> rising 17 Canadian cents to yield 1.837 percent.

The gap between Canada's two-year yield and its U.S. equivalent widened by 1.5 basis points to a spread of -33.3 basis points.

(Reporting by Fergal Smith; Editing by Lisa Von Ahn)

12/07/2017 10:18

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