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TORONTO, May 12 (Reuters) – The Canadian dollar edged lower against its U.S. counterpart on Thursday as investors grew more nervous about global economic prospects and awaited a speech by a senior Bank of Canada official, but the move stopped short of Tuesday’s 18-month low.

Equity markets globally sank to a 1-1/2-year low and the safe-haven U.S. dollar .DXY hit its highest level in two decades, as fears grew that fast-rising inflation will drive a sharp jump in interest rates that brings the global economy to a standstill. nL2N2X40QC

Bank of Canada Deputy Governor Toni Gravelle will speak on commodities, growth and inflation, which could help guide expectations for another half-percentage-point interest rate hike at the June 1 policy announcement. The central bank is due to make the deputy governor’s remarks available at 11:35 a.m. EDT (1535 GMT). BOCWATCH

The Canadian dollar CAD= was trading 0.1% lower at 1.3005 to the greenback, or 76.89 U.S. cents. The currency traded in a range of 1.2978 to 1.3047, after touching on Tuesday its weakest level since November 2020 at 1.3052.

The price of oil, one of Canada’s major exports, rose as recession fears were offset by supply concerns and geopolitical tensions in Europe. U.S. crude CLc1 prices gained 0.4% to $106.18 a barrel. nL2N2X403C

Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year CA10YT=RR eased 9.2 basis points to hit its lowest level since May 4 at 2.912%.

(Reporting by Fergal Smith
Editing by Paul Simao)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))

Adds details

By Manoj Kumar and Aftab Ahmed

NEW DELHI, May 12 (Reuters) – Rising food and energy prices pushed India’s annual retail inflation up towards an eight-year high in April, strengthening economists’ view that the central bank would have to raise interest rates more aggressively to curb prices.

Consumer price index-based inflation CPIY=ECI rose more than expected to 7.79% in April year-on-year, remaining above the Reserve Bank of India’s (RBI) tolerance band of 6% for a fourth month in a row, data released by National Statistics Office showed on Thursday.

April’s print was higher than 6.95% in the previous month and 4.23% a year ago. Analysts had forecast retail inflation at 7.5%, according to a Reuters poll.

RBI’s monetary policy committee (MPC), which raised the key repo rate (INREPO=ECI> by 40 basis points to 4.40% in an emergency meeting earlier this month, will consider more interest rate hikes at its June meeting, a source familiar with the matter told reporters on Wednesday.nL2N2X30U5

The next meeting of RBI’s MPC is scheduled for June 6-8.

Economists said rising food prices were an overriding worry for consumers – already hit hard during two years of the pandemic – as prices of edible oil and vegetables have surged amid fears of a fall in wheat output this year.

India’s annual retail headline inflation was at 8.33% in May 2014 when Prime Minister Narendra Modi took charge, while promising to bring down prices.

Prices of food items, which make up nearly half of the consumer price index (CPI), rose 8.38% year-on-year in April, compared with 7.68% a month earlier, pushed by rise in edible oil and vegetable prices.

A near 4% rupee depreciation against dollar this year has also made imported items costlier.

(Reporting by Manoj Kumar and Aftab Ahmed
Editing by Raissa Kasolowsky and Bernadette Baum)

((manoj.kumar@thomsonreuters.com; +91(11) 49548029;))

Recasts, adds comments, details, chart, updates prices

By Yoruk Bahceli

May 12 (Reuters) – Euro zone bond yields fell sharply on Thursday and were set for their best daily performance since early March after U.S. inflation data reinforced investors’ concerns over the outlook for growth given the prospects for aggressive central bank rate hikes.

The U.S. consumer price data, released on Wednesday, showed inflation slowed in April but was still higher than expected, while a narrower reading stripping out volatile food and energy prices rose sharply. nL2N2X315F

That eventually pushed stock markets and bond yields sharply lower, with much of the move coming after the European close, as the focus turned back to the economic toll that aggressive Fed rate hikes could have. nL2N2X32ZQ nL2N2X32KF

On Thursday, that weak sentiment was mirrored in Europe and stocks tumbled nearly 2% while U.S. stocks were also set for more selling pressure.

Bond yields fell sharply led by the longer-end of the yield curve and Germany’s 10-year yield, the benchmark for the bloc, was down over 13 bps by 1131 GMT, the lowest in two weeks and its biggest daily fall since March 1. DE10YT=RR Bond yields move inversely with prices.

“It feels like there is a lot of positioning getting flushed out around these (inflation) releases in the U.S. But more broadly we have an environment where growth concerns are accelerating… That comes at a central banks are becoming more and more hawkish,” said Antoine Bouvet, senior rates strategist at ING.

“In this environment if central banks get inflation under control and growth is slowing down, then all of a sudden bonds that didn’t really behave like safe havens over the past few months start behaving like safe havens.”

Market-based inflation gauges are also falling sharply, with the euro zone five-year five-year breakeven forward down to 2.20% on Thursday, having risen as high as 2.50% last week. EUIL5YF5Y=R

Germany’s two-year yield, sensitive to interest rate expectations, was down 10 bps to 0.04%, the lowest in three weeks and nearing negative territory, which it exited in mid-April. DE2YT=RR

Money markets meanwhile have trimmed their bets on ECB rate hikes, now pricing in 83 bps of hikes by year-end, compared to 95 bps at the start of the week. ECBWATCH

Moves this week have marked a remarkable turnaround for bond markets, where yields recently rose above key levels as investors ramped up their bets on rate hikes from central banks to combat decades-high inflation.

Germany’s 10-year yield is down 28 bps this week, set for its biggest weekly fall since early March.

That has been supportive of Italian debt, a key beneficiary of ECB stimulus, with the closely-watched risk premium over German bonds falling to 188 bps after rising over 200 bps recently, which was the highest since May 2020.

Its 10-year yield is at 2.75%, down from over 3% last week and was down 14 bps on Thursday. IT10YT=RR, DE10IT10=RR

Italy raised 6.75 billion euros from an auction of three, seven and 30-year bonds to strong demand. nAPN0KMLUI

In another auction, Ireland raised 1.25 billion euros from 10 and 23-year bonds. nL2N2X40RF

(Reporting by Yoruk Bahceli; Editing by Simon Cameron-Moore and Angus MacSwan)

((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters Messaging: yoruk.bahceli@thomsonreuters.com))

Recasts, adds comment, updates prices

By Eileen Soreng

May 12 (Reuters) – Gold prices inched lower on Thursday as the dollar scaled a fresh two-decade peak after April U.S. inflation data bolstered expectations that the Federal Reserve would stick to its aggressive rate-hike roadmap.

Spot gold XAU= fell 0.2% to $1,848.15 per ounce by 0959 GMT. U.S. gold futures GCv1 were down 0.2% at $1,849.20.

“We would expect gold to get support from the higher inflation environment … The dollar has actually gained quite a bit since the CPI print and that’s prohibiting gold from making gains,” WisdomTree analyst Nitesh Shah said.

The U.S. dollar index =USD rose to fresh two-decade highs on as concerns that tighter monetary policies to tame surging inflation will hurt the global economy dampened risk sentiment and drove investors into the safe-haven currency. USD/ nL5N2X43HC

The inflation reading comes on the heels of the Fed raising its benchmark overnight interest rate by an aggressive half-a-percentage point last week, the most in 22 years.

There is also the risk of central banks overdoing it and posing recessionary risks which could support gold, Shah added.

Gold is highly sensitive to rising U.S. interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion and also tend to boost the dollar in which gold is priced. It is, however, seen as a safe store of value during economic and political crises.

Declines in gold were, however, limited by a slide in the benchmark 10-year Treasury yields US10YT=RR, which hit the lowest level in two weeks. US/

Spot silver XAG= fell 1.4% to $21.25 per ounce, platinum XPT= dropped 2.6% to $966.21 and palladium XPD= slid 3.2% to $1,969.85.

(Reporting by Eileen Soreng in Bengaluru; Editing by Vinay Dwivedi)

((eileen.soreng@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 80 6749 6131; Reuters Messaging: eileen.soreng.thomsonreuters.com@reuters.net))

Adds detail, updates prices

May 12 (Reuters) – The Russian rouble firmed on Thursday, crossing the 70 mark against the euro and heading towards 65 against the dollar as it retained artificial support from capital controls.

The rouble has become the world’s best-performing currency this year with support from capital controls that Russia imposed to shield the financial sector in late February after Moscow sent tens of thousands of troops into Ukraine.

At 1003 GMT, the rouble gained more than 2% to 65.58 against the dollar RUBUTSTN=MCX after briefly touching 65.0625, a level last seen in late February 2020.

Against the euro, the rouble firmed more than 3% to 68.28 EURRUBTN=MCX, having earlier hit 67.85, its strongest level since January 2020.

The rouble could firm to 65 to the dollar during the day, Promsvyazbank said in a note.

The rouble is driven by export-focused companies that have to convert their foreign currency revenues, while demand for foreign exchange is limited as imports into Russia have waned amid disruption in logistics and sweeping Western sanctions.

In the longer run, the rouble may see some downside pressure mounting from an increase in imports after Russia allowed so-called parallel imports of goods, analysts say.

Last week, Moscow published a list of goods from foreign carmakers, technology companies and consumer brands that the government has included in a “parallel imports” scheme aimed at shielding consumers from business isolation by the West. nL5N2WY56S

Russian stock indexes were mixed. The dollar-denominated RTS index .IRTS rose 0.7% to 1,132.6 points. Its rouble-based peer MOEX .IMOEX was 1.4% lower at 2,354.8 points.

Shares in Russia’s second-largest oil producer Lukoil LKOH.MM fell 1.8% on the day after the company said it will buy Shell’s SHEL.L Russian retail and lubricants businesses. nL3N2X42CT

For Russian equities guide see RU/EQUITY

For Russian treasury bonds see 0#RUTSY=MM

(Reporting by Reuters;
Editing by Robert Birsel and Bernadette Baum)