C$ rallies as investors stick to BoC rate hike bets

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TORONTO — The Canadian dollar rallied

against its broadly weaker U.S. counterpart on Monday as markets

reversed some of the moves made after last week’s robust U.S.

jobs report and continued to price in another oversized interest

rate hike by the Bank of Canada.

Wall Street’s main indexes rose and the U.S. dollar

fell against a basket of major currencies as Friday’s U.S. jobs

data soothed some fears about an economic slowdown even as it

added to expectations of a hawkish Federal Reserve.

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Meanwhile, money markets see about a two-thirds chance that

the Bank of Canada hikes interest rates by three quarters of a

percentage point in September despite data on Friday showing

that Canada’s economy shed jobs for a second straight month.

“The underlying trend in job growth remains firm and a

couple of soft reports will not significantly ease the Bank of

Canada’s concern about what it has characterized as a ‘very,

very tight’ labor market,” strategists at Scotiabank, including

Shaun Osborne, said in a note.

The Canadian dollar was trading 0.7% higher at 1.2843

to the greenback, or 77.86 U.S. cents, after touching on Friday

its weakest intraday level in more than two weeks at 1.2984.

Speculators have raised their bullish bets on the Canadian

dollar to the highest in seven weeks, data from the U.S.

Commodity Futures Trading Commission showed on Friday.

The price of oil , one of Canada’s major exports, held

near a six-month low amid worries about the demand outlook. U.S.

crude prices were down 0.5% at $88.60 a barrel.

Canadian government bond yields fell across much of an

inverted yield curve.

The 10-year was down 4.7 basis points at 2.701%,

while it dropped an additional 5.4 basis points below the 2-year

to a gap of 55.5 basis points.

(Reporting by Fergal Smith

Editing by Alistair Bell)

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