*Canadian dollar weakens 0.4% against greenback*Declines 2.3% in February*Canadian economy stalls in fourth quarter*Canadian bond yields fallTORONTO,
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Canadian dollar weakens 0.4% against greenback
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Declines 2.3% in February
*
Canadian economy stalls in fourth quarter
*
Canadian bond yields fall
TORONTO, Feb 28 (Reuters) – The Canadian dollar weakened
against its U.S. counterpart on Tuesday after the release of
disappointing GDP data that reinforced investor bets for the
Bank of Canada to leave its benchmark interest rate on hold in a
policy decision next week.
The Canadian economy recorded zero growth in the final three
months of 2022, massively underperforming expectations, though
economic activity likely rebounded with a 0.3% increase in
January.
“Even though the advance estimate for January pointed to
solid growth to start 2023, signs of a weaker-than-expected
economy and easing inflationary pressures should be enough to
keep the Bank of Canada on hold,” Andrew Grantham, a senior
economist at CIBC Capital Markets, said in a note.
Money markets continued to expect that Canada’s central bank
will hold its benchmark rate at 4.50% in a March 8 policy
announcement and trimmed bets that it will be forced to tighten
again later this year.
The central bank has said that no further interest rate
increases would be needed if the economy stalls and inflation
comes down as it expects.
The Canadian dollar was trading 0.4% lower at 1.3625
to the greenback, or 73.39 U.S. cents, but stopping short of the
seven-week low it hit on Friday at 1.3665. For the month, it was
down 2.3%.
The price of oil, one of Canada’s major exports, rallied as
hopes for a solid economic rebound in China offset worries about
further U.S. interest rate hikes. U.S. crude oil futures
settled 1.8% higher at $77.05 a barrel.
Canadian government bond yields fell across a steeper curve.
The 2-year eased 4.8 basis points to 4.220%, while
the 10-year was down 3.8 basis points at 3.356%.
The 10-year was trading 2.6 basis points further below
its U.S. equivalent at a gap of 55.4 basis points.
(Reporting by Fergal Smith; Editing by Paul Simao and
Marguerita Choy)
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