CANADA FX DEBT-C$ gains as hot core inflation stokes rate hike bets

BY Reuters | ECONOMIC | 08/16/22 09:23 AM EDT
       * Canadian dollar strengthens 0.1% against greenback
    * Average of Bank of Canada's core inflation measures up
    * Price of U.S. oil falls 0.3%
    * Canadian bond yields rise across curve

    TORONTO, Aug 16 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Tuesday as investors raised bets
on a supersized interest rate hike by the Bank of Canada next
month after domestic data showed rising underlying inflation
pressures.
    Canada's annual inflation rate slowed to 7.6% in July as
gasoline prices eased, but that was still far above the Bank of
Canada's 2% target, while the average of the Bank of Canada's
three core measures ticked up to 5.3% from 5.2%, data from
Statistics Canada showed.
    Money markets priced in 56 basis points of tightening by the
central bank at its next policy announcement on Sept. 7, up from
53 basis points before the data.
     The Canadian dollar        was up 0.1% at 1.2887 to the
greenback, or 77.60 U.S. cents, after trading in a range of
1.2882 to 1.2928. On Monday, it touched its weakest level in one
week at 1.2934.
    The price of oil, one of Canada's major exports, seesawed as
the market awaited clarity on talks to revive a deal that could
allow more Iranian oil exports and after bleak economic data
from China raised fears about the demand outlook.
    U.S. crude        prices were down 0.3% at $89.17 a barrel.
    Canadian government bond yields were higher across the
curve, with the 2-year            jumping 9.8 basis points to
3.307% and the 10-year             up 5.7 basis points at
2.752%.

 (Reporting by Fergal Smith
Editing by Mark Heinrich)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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