CANADA FX DEBT-Canadian dollar lags G10 peers as greenback slides

BY Reuters | ECONOMIC | 12/01/22 10:46 AM EST

*

Canadian dollar weakens 0.3% against the greenback

*

Price of U.S. oil rises 2.9%

*

Canadian manufacturing PMI rises to 49.6 in November

*

Canadian bond yields ease across curve

TORONTO, Dec 1 (Reuters) - The Canadian dollar fell against its broadly weaker U.S. counterpart on Thursday, as investors scaled back Bank of Canada interest rate hike bets and domestic data showed factory activity slowing for a fourth straight month.

The loonie was trading 0.3% lower at 1.3445 to the greenback, or 74.38 U.S. cents. It was giving back some of its sharp gains from the previous day when Federal Reserve Chair Jerome Powell said that U.S. rate hikes could slow in December.

Still, it was the only G10 currency to lose ground against the U.S. dollar. The greenback was down 1% against a basket of major currencies.

The Bank of Canada has also been raising rates. Chances that it would hike by 50 basis points rather than 25 basis points at a policy decision next Wednesday have been cut to roughly 10% from 30% since Powell's comments, money market data shows.

A slim majority of economists in a Reuters poll expect the larger move but that the BoC would then pause its tightening campaign.

The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) rose to a seasonally adjusted 49.6 in November from 48.8 in October.

A reading of less than 50 shows contraction in the sector. The PMI has been below that level each month since August.

Canada's jobs report for November, due on Friday, could offer further clues on the strength of the domestic economy.

U.S. crude oil was up 2.9% at $82.91 a barrel on the chance of further supply cuts by OPEC+ and after China announced an easing of COVID curbs.

Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries.

The 10-year touched its lowest level since Aug. 18 at 2.860% before rebounding slightly to 2.876%, down 5.9 basis points on the day. (Reporting by Fergal Smith Editing by Marguerita Choy)

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.

fir_news_article