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Canadian dollar dips after
big gains last week

The Canadian dollar weakened against its broadly firmer U.S. counterpart on Monday, as the market paused after the unit last week posted its strongest gain in 18 months on signals from the Bank of Canada that higher interest rates lie ahead. The loonie rose 1.9 percent last week, its biggest advance since the first week of 2016.
 
The U.S. dollar rose against a basket of major currencies, helped by comments from New York Federal Reserve President William Dudley suggesting the central bank remained on track to raise U.S. interest rates further despite recent disappointing inflation data.
 
In early morning trading Monday the Canadian dollar was trading at C$1.3227 to the greenback, or 75.60 U.S. cents, down 0.1 percent. The currency traded in a range of C$1.3211 to C$1.3260. It touched its strongest in 3-1/2 months on Wednesday at C$1.3165.
 
Speculators cut bearish bets on the Canadian dollar for a third straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian dollar net short positions fell to 88,595 contracts as of June 13 from 94,501 a week earlier. In May, net short positions reached a record high 99,109 contracts.
 
U.S. crude prices were up 0.40 percent at $44.92 a barrel. Prices of oil had come under pressure over the past month from rising production in the United States, Libya and Nigeria. Oil is one of Canada's major exports. [O/R]
 
Canadian government bond prices were mixed across a flatter yield curve, with the two-year down 3.5 Canadian cents to yield 0.916 percent and the 10-year falling 5 Canadian cents to yield 1.528 percent.
 
The gap between the 2-year and 10-year yields narrowed by 1.4 basis points to a spread of +61.2 basis points, its smallest gap since Oct. 26, as shorter dated Canadian bonds underperformed.
 
Canadian wholesale trade data for April is due out on Tuesday, while inflation data for May is due on Friday.
 
The U.S. dollar nudged higher on Monday as an influential U.S. Federal Reserve official expressed confidence rising wages would help revive domestic inflation which has shown signs of softening recently.
 
The yen weakened against the greenback and euro following Friday's Bank of Japan meeting where officials downplayed the likelihood it would begin to roll back emergency stimulus for the economy.
 
On Monday, New York Fed President William Dudley's comments came with doubts whether stubbornly low inflation, which has been stuck below the central bank's 2-percent goal, would allow policy-makers to raise rates further the rest of the year.
 
The Fed doesn't seem to be too concerned about the recent pullback in the inflation data. They are committed to policy normalization. The Fed, as expected, raised key overnight borrowing costs by a quarter point last Wednesday and left the door open for another rate increase later this year. It also provided more details on its plan to reduce its bond purchases in a bid to shrink its $4.5 trillion balance sheet.
 
“Inflation is a little lower than what we would like, but we think that if the labour market continues to tighten, wages will gradually pick up and with that, inflation will gradually get back to 2 percent," Dudley told a local business group in Plattsburg, New York.
 
Traders raised their outlook on a rate hike by the Fed's Dec. 12-13 policy meeting to 45 percent from 41 percent late on Friday, CME Group's FedWatch tool showed. An index, which gauges the dollar against six other currencies, was up 0.15 percent at 97.310.
 
The euro was down 0.2 percent versus the greenback to $1.1174, while the dollar gained 0.4 percent against the yen at 111.32 yen. The single currency was up 0.2 percent at 124.39 yen, There was no discernible boost for the single currency from French President Emmanuel Macron's landslide in parliamentary elections on Sunday.
 
Sterling was 0.1 percent lower at $1.2761 higher ahead of the formal start of negotiations on Britain's planned exit from the European Union. Speculation that a surprise election result earlier in June could generate a drift towards a "soft Brexit" has given the pound some support, although many analysts expect newsflow from the talks to hurt it.
 
World stock markets advanced on Monday as technology and retail stocks rebounded from recent declines and U.S. Treasury yields rose in the wake of hawkish comments from a Federal Reserve official.
 
The tech sector, up 1.4 percent, pushed equity indexes on Wall Street higher, with the Dow and S&P 500 hitting intraday records. The group had fallen 3.4 percent over the past two weeks.
 
Some of it is folks taking a second look at names that may have been unduly punished in the rotation out of tech that started about ten days ago. Which makes sense; there has been no change in the fundamentals for the tech sector.
 
Retailers in Europe, up 0.8 percent, and the U.S., up 0.7 percent, recouped some losses suffered in the wake of news on Friday of Amazon's $13.7 billion deal to buy upscale grocer Whole Foods Market.
 
It was Amazon's first major brick-and-mortar acquisition in the sector and already-struggling retailers were hit hard by the prospect of having a well-known disruptor as a competitor.
 
The Dow Jones Industrial Average rose 97.13 points, or 0.45 percent, to 21,481.41, the S&P 500 gained 15.46 points, or 0.64 percent, to 2,448.61 and the Nasdaq Composite .added 70.77 points, or 1.15 percent, to 6,222.53.
 
A gain in Europe's banks, up 1.5 percent, also boosted European shares in the wake of broker upgrades for Credit Suisse. The pan-European FTSEurofirst 300 index rose 0.96 percent and MSCI's gauge of stocks across the globe gained 0.62 percent.
 
The U.S. dollar and Treasury yields moved higher after comments from New York Federal Reserve President William Dudley that reinforced expectations the central bank will continue on its path of tightening monetary policy.
 
The U.S. dollar index, tracking the greenback against a basket of key currencies, rose 0.22 percent, with the euro down 0.28 percent to $1.1166.
 
Benchmark 10-year notes last fell 5/32 in price to yield 2.174 percent, from 2.157 percent late on Friday. The Fed raised rates last week and said it would begin cutting its holdings of bonds and other securities this year.
 
The stronger dollar weighed on gold prices, but losses were curbed by uncertainty as talks commenced on the terms of Britain's departure from the European Union.
 
Britain's negotiators came to Brussels seeking a "new, deep and special partnership with the European Union" on Monday as talks on the unprecedented British withdrawal from the bloc finally got under way.
 
Oil prices managed to steady after four straight weeks of declines sparked by rising production in the United States, Libya and Nigeria, which had taken the edge off an OPEC-led initiative to cut output to support the market. U.S. crude rose 0.29 percent to $44.87 per barrel and Brent was last at $47.58, up 0.44 percent on the day.
 


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