Canadian dollar rises as fiscal spending clips rate-cut bets
Canadian dollar gains 0.1% against the greenback
Touches its strongest level since Nov. 12
Government unveils C$6.3 billion in new spending
10-year yield touches four-month high at 3.466%
By Fergal Smith
TORONTO, Nov 21 (Reuters) -The Canadian dollar edged up to a nine-day high against its U.S. counterpart on Thursday and bond yields climbed as a Canadian government proposal to increase spending reduced prospects for another outsized interest rate cut from the Bank of Canada.
Canada's Liberal government, which is trailing badly in the polls ahead of next year's election, unveiled C$6.3 billion ($4.5 billion) in proposed new spending measures to help consumers deal with high prices.
The measures could "translate into a noticeable boost to (gross domestic product) growth in the first half of next year," Royce Mendes, managing director and head of macro strategy at Desjardins, said in a note.
"The Bank of Canada will take this into account when considering how quickly and how far to cut rates. ... The announcement should all but close the door to a 50-basis-point cut next month."
Investors see a roughly 10% chance the BoC will reduce its benchmark rate by half a percentage point at its next policy decision on Dec. 11, down from 38% before hotter-than-expected Canadian inflation data on Tuesday. 0#CADIRPR
The central bank eased by 50 basis points in October, the first cut of that magnitude in 15 years outside of the pandemic era.
The Canadian dollar CAD= was trading 0.1% higher at 1.3960 per U.S. dollar, or 71.63 U.S. cents, after touching its strongest intraday level since Nov. 12 at 1.3928.
The price of oil, one of Canada's major exports, rose 1.5% to $69.76 a barrel on rising Russia-Ukraine tensions, while the U.S. dollar .DXY extended recent gains against a basket of major currencies as investors assessed the latest data on the American labor market.
Canadian bond yields increased across the curve. The 10-year CA10YT=RR was up 5.8 basis points at 3.445%.
Reporting by Fergal Smith; Editing by Leslie Adler
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