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CANADA’S FX DEBT – Canadian dollar slips as inflation risk affects sentiment

By on June 3, 2021 0

* The Canadian dollar drops 0.6% against the greenback * The loonie hits its lowest since last Friday at 1.2114 * Oil hits its highest since October 2018 at $ 69.40 per barrel * Bond yields Canadians rise on much of steeper curve TORONTO, June 3 (Reuters) – The Canadian dollar weakened to a six-day low on Thursday against its U.S. counterpart, as investors weighed the risk of inflation and awaited employment data from the United States and Canada that could offer clues to the central bank’s policy outlook. Global equity markets retreated from record highs as higher oil prices added to inflation fears. Oil, one of Canada’s top exports, hit its highest level since October 2018 at $ 69.40 a barrel before dropping below $ 69. It was supported by expectations of increased demand for fuel later this year as major producers maintain supply discipline. The Canadian dollar, which has experienced a tear this year amid rising commodity prices and the Bank of Canada’s more hawkish stance, was trading down 0.6% to 1.2106 for the note green, or 82.60 US cents. It hit its lowest intraday level since last Friday at 1.2114. The US and Canadian employment reports for May are due on Friday. Economists expect Canadian employment to fall 20,000 in May after falling 207,000 in April. Some provinces went into lockdown in April to curb a third wave of the COVID-19 pandemic. Nonetheless, the Bank of Canada is expected to scale back its asset purchase program again next quarter and raise interest rates earlier than expected amid expectations of a robust economic recovery from a recent slowdown, according to a Reuters poll. The US dollar gained ground against a basket of major currencies as a strong US economic rebound threatened to derail the assumption that interest rates would stay low for a long time. Canadian government bond yields were higher on much of a steeper curve, following the movement of US Treasuries. The 10-year was up 1.3 basis points to 1.508%. (Reporting by Fergal Smith; editing by Jonathan Oatis)