Canadian dollar firms ahead of Macklem speech on QE program

TORONTO: The Canadian dollar edged higher against its US counterpart on Thursday despite lower oil prices, with investors awaiting a speech from Bank of Canada Governor Tiff Macklem that could offer clues on the outlook for bond purchases.

Macklem is due to speak at 12 p.m. ET (1600 GMT) on the reinvestment phase of the central bank's quantitative easing program. The choice of topic could signal that bond purchases are likely to be reduced further over the coming months from the current level of C$2 billion per week.

The reinvestment phase is an issue Macklem "would only seriously air when the bank's asset purchases are nearing an end," strategists at Scotiabank, including Shaun Osborne, said in a note.

On Wednesday, the BoC left rates unchanged and said it expects growth to strengthen in the second half of the year following a shock contraction last quarter, though a fourth wave of COVID-19 and supply bottlenecks could weigh on the recovery.

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The Canadian dollar was trading 0.1% higher at 1.2675 to the greenback, or 78.90 US cents, after trading in a range of 1.2667 to 1.2727. On Tuesday, the currency hit a two-week low at 1.2761.

The price of oil, one of Canada's major exports, fell 1.8% as the spread of the coronavirus clouded the outlook for demand recovery, while the US dollarwas pressured by a stronger euro.

The European Central Bank, as expected, said it would slightly reduce the pace of bond buying under its emergency scheme.

Meanwhile, the leader of Canada's main opposition Conservative Party squares off against Prime Minister Justin Trudeau in a televised debate on Thursday that could go a long way in deciding who wins a Sept. 20 election.

Canadian government bond yields were little changed across the curve, with the 10-year trading at about 1.20%.