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Canadian dollar weakens 0.5% against the greenback
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Touches its strongest since Nov. 16 at 1.3297
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Price of U.S. oil settles 2.2% lower
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10-year yield touches a near three-week high
(Adds strategist quotes and details throughout; updates prices)
By Fergal Smith
TORONTO, Jan 30 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday, pulling back from its
strongest level in over two months, as investors turned cautious
ahead of an expected interest rate hike this week by the Federal
Reserve.
The loonie was trading 0.5% lower at 1.3380 to the
greenback, or 74.74 U.S. cents, after earlier touching its
strongest since Nov. 16 at 1.3297.
Wall Street shares fell and the price of oil, one of
Canada's major exports, settled 2.2% lower at $77.90 a barrel.
The Fed is expected to raise its key interest rate by 25
basis points at the end of its two-day policy meeting on
Wednesday, followed by Fed Chair Jerome Powell's speech, which
will be scrutinized for any signs of further increases.
"Implied volatility is ratcheting up and risk-sensitive (currency) pairs are generally selling off as traders batten the hatches ahead of this week's central bank meetings," said Karl Schamotta, chief market strategist at Corpay. "If Jerome Powell tries to fight a premature loosening in financial conditions by delivering a more hawkish message, the loonie could sell off quite sharply." The Bank of Canada has also been raising interest rates. Last Wednesday, the central bank lifted its benchmark rate to a 15-year high of 4.5% and signaled it would now pause to assess how effective tightening had been in dampening excess demand. Canadian GDP data, due on Tuesday, is expected to show the economy expanded by 0.1% in November.
Speculators have raised their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year touched its highest since Jan. 12 at 2.950% before dipping to 2.929%, up 4.3 basis points on the day. (Reporting by Fergal Smith Editing by Bernadette Baum, William Maclean)
