Interest Rate Forecast.
There is speculation that the Bank of Canada may not be as aggressive as originally thought on rate increases this year due to unexpected job losses in December and a slowdown in business spending. Currency traders now only expect two rate increases this year, instead of the 4 they predicted earlier.
Canada's Dollar Falls on Speculation of Fewer Rate Increases Jan. 9 (Bloomberg) -- Canada's dollar fell for a third day on speculation signs of slowing economic growth may curb the pace of interest-rate increases. The Canadian currency fell last week as reports showed business spending slowed to the lowest since July 2003 and the economy unexpectedly lost jobs in December.
The Bank of Canada lifted its benchmark overnight rate three times since September, to 3.25 percent from 2.5 percent. Policy makers next meet on Jan. 24 and March 7.
``The market has priced out more aggressive moves from the Bank of Canada,'' Marc Levesque, chief strategist at TD Securities in Toronto. ``This is working against the Canadian dollar.'' Canada's dollar fell 0.6 percent to 85.25 U.S. cents at 9 a.m. in Toronto, from 85.80 U.S. cents on Jan. 6. One U.S. dollar buys C$1.1730. The currency has fallen from 87.45 U.S. cents on Dec. 14, which was the highest since January 1992. Levesque predicted the Canadian dollar may weaken to C$1.20, or 83.33 U.S. cents, by the end of this year. Traders now only expect two more rate increases and see less than a 50 percent chance for a third increase this year by the central bank, said Levesque. At the beginning of last week, traders expected four more rate moves by the central bank, he said. Futures Yields The yield for the March bankers' acceptances futures contract fell to 3.80 percent from 3.95 percent at the beginning of this year, which was near the highest in more than a year. Traders use bankers' acceptances contracts as a gauge of expectations for the Bank of Canada's benchmark rate. The futures settle at a three-month lending rate that has averaged 16 basis points above the central bank's rate target since Bloomberg started tracking the gap in 1992.
Futures traders have decreased their bets that the Canadian dollar will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- declined to 36,687 as of Jan. 3, compared with net longs of 56,183 as of Dec. 13, the highest ever.
Canada's Dollar Falls on Speculation of Fewer Rate Increases Jan. 9 (Bloomberg) -- Canada's dollar fell for a third day on speculation signs of slowing economic growth may curb the pace of interest-rate increases. The Canadian currency fell last week as reports showed business spending slowed to the lowest since July 2003 and the economy unexpectedly lost jobs in December.
The Bank of Canada lifted its benchmark overnight rate three times since September, to 3.25 percent from 2.5 percent. Policy makers next meet on Jan. 24 and March 7.
``The market has priced out more aggressive moves from the Bank of Canada,'' Marc Levesque, chief strategist at TD Securities in Toronto. ``This is working against the Canadian dollar.'' Canada's dollar fell 0.6 percent to 85.25 U.S. cents at 9 a.m. in Toronto, from 85.80 U.S. cents on Jan. 6. One U.S. dollar buys C$1.1730. The currency has fallen from 87.45 U.S. cents on Dec. 14, which was the highest since January 1992. Levesque predicted the Canadian dollar may weaken to C$1.20, or 83.33 U.S. cents, by the end of this year. Traders now only expect two more rate increases and see less than a 50 percent chance for a third increase this year by the central bank, said Levesque. At the beginning of last week, traders expected four more rate moves by the central bank, he said. Futures Yields The yield for the March bankers' acceptances futures contract fell to 3.80 percent from 3.95 percent at the beginning of this year, which was near the highest in more than a year. Traders use bankers' acceptances contracts as a gauge of expectations for the Bank of Canada's benchmark rate. The futures settle at a three-month lending rate that has averaged 16 basis points above the central bank's rate target since Bloomberg started tracking the gap in 1992.
Futures traders have decreased their bets that the Canadian dollar will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Canadian dollar compared with those on a drop -- so-called net longs -- declined to 36,687 as of Jan. 3, compared with net longs of 56,183 as of Dec. 13, the highest ever.
posted by Mortgageman at 3:15 PM
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