CANADA FX DEBT-C$ climbs to 2-week high as China eases lending rate

BY Reuters | ECONOMIC | 05/20/22 09:18 AM EDT
       * Canadian dollar strengthens 0.3% against the greenback
    * Touches its strongest since May 5 at 1.2777
    * Price of U.S. oil rises 0.1%
    * Canadian bond yields trade mixed across curve

    TORONTO, May 20 (Reuters) - The Canadian dollar strengthened
to its highest level in more than two weeks against its U.S.
counterpart on Friday as Chinese authorities moved to cushion
the impact of an economic slowdown, with the currency on track
to snap a weekly losing streak.
    Stock markets globally          rebounded after China cut a
key lending benchmark to support its economy. Worries about
slowing growth and high inflation have weighed on markets in
recent weeks.
    Canada is a major exporter of commodities, including oil, so
the loonie is particularly sensitive to the global economic
outlook.
    U.S. crude        prices rose 0.1% to $112.34 a barrel,
while the Canadian dollar was trading 0.3% higher at 1.2790 to
the greenback, or 78.19 U.S. cents.
    The currency touched its strongest since May 5 at 1.2777.
For the week, it was on track to advance 0.9%, after declining
for seven straight weeks.
    It follows domestic data on Wednesday showing that annual
inflation rate rose faster than expected in April, raising
pressure on the Bank of Canada to tighten policy quickly.

    The central bank is likely to be among the first of the
major central banks to lift interest rates to a more normal
setting even as worries persist about record-high levels of
household debt. Its next policy decision is due on June 1.

    Canadian government bond yields were mixed across the curve,
with the bond market set to close early ahead of the Victoria
Day holiday on Monday.
    The 10-year             dipped about half a basis point to
2.875%, after touching on Thursday its lowest intraday level in
nearly three weeks at 2.830%.

 (Reporting by Fergal Smith;
Editing by Alison Williams)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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