C$ rallies as bond yields tumble on surprise BoE move


Canadian dollar rises 0.7% against the greenback


Touches its weakest intraday since May 2020 at 1.3832


Price of U.S. oil settles 4.7% higher


10-year yield tumbles 26 basis points

By Fergal Smith

TORONTO, Sept 28 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as the Bank of England's move to support the bond market wrong-footed some investors, with the currency pulling back from its weakest level in more than two years.

Wall Street rebounded strongly following its recent sell-off, while U.S. Treasury yields tumbled and the U.S. dollar DXY lost ground against a basket of major currencies after the BoE said it would buy long-dated British bonds in a move aimed at restoring financial stability.

Markets have been rocked globally by the fiscal policy of the new government in London.

"This Bank of England move caught everybody off guard," said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull. "Because there is lots of broad dollar selling, it's benefiting the Canadian (currency)."

The Canadian dollar CAD= was trading 0.7% higher at 1.3625 to the greenback, or 73.39 U.S. cents, after earlier touching its weakest level since May 2020 at 1.3832.

"There is still a lot of people short bonds, short equities, long the (U.S.) dollar - all the trades that were working very well up until today," Bregar said.

"I wouldn't be surprised after some consolidation overnight that what we're seeing today continues into the end of the week."

Adding to support for the loonie, the price of oil CLc1 settled 4.7% higher at $82.15 a barrel as U.S. fuel inventory figures showed larger-than-expected drawdowns and a rebound in consumer demand. Oil is one of Canada's major exports.

The Bank of Canada said it would begin publishing a summary of its monetary policy deliberations starting next year, accepting a key recommendation from a transparency review by the International Monetary Fund.

The Canadian 10-year yield CA10YT=RR tumbled 26 basis points to 3.06%, after earlier touching its highest since June 28 at 3.368%.
Reporting by Fergal Smith, editing by Nick Zieminski and Marguerita Choy

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.