CANADA FX DEBT-C$ hits 18-month low as investors slash rate hike bets
(Updates prices) * Canadian dollar falls 0.8 percent against the greenback * Bank of Canada leaves policy rate on hold at 1.75 percent * Loonie hits its lowest since June 2017 at 1.3400 * Canada's 10-year yield hits a 4-1/2-month low at 2.118 percent * Price of U.S. oil falls 0.7 percent By Fergal Smith TORONTO, Dec 5 (Reuters) - The Canadian dollar weakened to a 1-1/2 year low against the greenback on Wednesday as investors slashed expectations for further interest rate hikes from the Bank of Canada after a dovish announcement from the central bank.
The Bank of Canada kept its benchmark interest rate on hold at 1.75 percent, as expected, and said there might be more room for non-inflationary growth, suggesting the pace of future hikes could be more gradual.
"From where we were last time out, things are a little bit more dovish in tone, and, not surprisingly we've seen the Canadian dollar weaken in the wake of that," said Michael Gregory, a senior economist at BMO Capital Markets.
Chances of a hike in January slumped from about 60 percent before the data to 35 percent, the overnight index swaps market indicated.
At 3:39 p.m. (2039 GMT), the Canadian dollar was trading 0.8 percent lower at 1.3377 to the greenback, or 74.76 U.S. cents. The currency touched its weakest since June 2017 at 1.3400.
The loonie weakened as global stocks were pressured by renewed worries about trade tensions and as the U.S. dollar strengthened against a basket of major currencies.
The price of oil, one of Canada's major exports, weakened ahead of a meeting of the world's biggest exporters which will discuss cutting output to help shore up prices and curb excess supply.
U.S. crude oil futures settled 0.7 percent lower at $52.89 a barrel.
Alberta's decision to mandate output cuts to reduce a glut will hurt North American producers of lighter oil used for blending and U.S. refiners importing crude via rail, even as several major Canadian energy companies cheered the move.
Canadian government bond prices rose across the yield curve, with the two-year up 12.5 Canadian cents to yield 2.051 percent and the 10-year rising 43 Canadian cents to yield 2.120 percent.
The 10-year yield hit its lowest intraday level since July 19 at 2.118 percent.
U.S. markets were closed on Wednesday to honor former U.S. President George H.W. Bush, who died last Friday.
(Reporting by Fergal Smith; Editing by Richard Chang)
