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CANADA FX DEBT-Canadian dollar steadies after posting longest daily winning streak in four years

By Reuters News

By Fergal Smith

TORONTO, Oct 26 (Reuters) - The Canadian dollar steadied against its US counterpart on Monday after seven straight days of gains, but the move was limited ahead of interest rate decisions this week by the Federal Reserve and the Bank of Canada.

The loonie was trading nearly unchanged at 1.4010 per US dollar, or 71.38 US cents, after moving in a range of 1.3999 to 1.4055.

  • The daily winning streak was the longest since March 2022 and led to the currency touching its strongest intraday level since September 16 on Friday, at 1.3966.

  • "The Canadian dollar has strengthened meaningfully over the past few sessions," said Sarah Ying, head of foreign exchange strategy at CIBC Capital Markets. "The main driver has been a shift in market expectations for both the Fed and the Bank of Canada."

  • The BoC will likely raise its benchmark interest rate for the first time since July 2023 on Wednesday as a pre-emptive move to stop energy-led inflation from spreading to the rest of the economy. Investors see a roughly 80% chance of a quarter-point hike that would lift the policy rate to 2.50%.

  • Fed policymakers have telegraphed they will not raise US short-term borrowing costs again on Wednesday, but with inflation concerns still front and center, investors believe a rate-hike pause will not last for long.

  • "Our base case is that the Fed delivers a hawkish hold that keeps December tightening on the table, which should help put a floor under USD-CAD," Ying said.

  • Speculators have cut their bearish bets on the Canadian dollar, data from the US Commodity Futures Trading Commission showed on Friday. Non-commercial net short positions fell to 74,709 contracts as of October 20, down from 94,765 in the prior week.

  • The price of oil, one of Canada's major exports, fell on hopes of easing hostilities between the United States and Iran.

  • US crude oil futures were trading 0.9% lower at $102.30 a barrel, while the US dollar rose against a basket of major currencies.

  • Canadian bond yields were mixed across a flatter curve, with the 10-year down 1.5 basis points at 3.832%.

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