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CANADA FX DEBT-C$ dips as NAFTA doubts offset oil rally
October 13, 2017 / 9:05 PM / 2 months ago

CANADA FX DEBT-C$ dips as NAFTA doubts offset oil rally

 (Adds portfolio manager quotes and additional details; updates
prices)
    * Canadian dollar at C$1.2483, or 80.11 U.S. cents
    * Loonie rises 0.4 percent for the week
    * U.S. crude        prices rise 1.70 percent
    * Bond prices higher across a flatter yield curve

    By Fergal Smith
    TORONTO, Oct 13 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Friday as an uncertain outlook
for the North American Free Trade Agreement offset higher oil
prices.
    The Trump administration demanded that U.S.-made content
account for half the value of the cars and trucks sold under the
North American Free Trade Agreement, raising further doubts
about any potential deal to renew the pact.             
    NAFTA negotiations are offsetting the benefit for the
currency from higher oil prices, said Hosen Marjaee, senior
managing director, Canadian fixed income at Manulife Asset
Management.
    Prices of oil, one of Canada's major exports, were boosted
by strong Chinese oil imports and U.S. President Donald Trump's
decision not to certify that Iran is complying with a nuclear
agreement.                          
    U.S. crude        prices settled 1.7 percent higher at
$51.45 a barrel.
    Also weighing on the loonie has been a reversal in recent
weeks of interest rate spreads between Canadian and U.S.
government debt as investors dialed back expectations for Bank
of Canada interest rate hikes.
    "It seems like there is not going to be an October hike,"
Marjaee said.
    The central bank has hiked rates twice since July. But
chances of another hike this month have fallen to 25 percent
from nearly 50 percent in mid-September.    
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading at C$1.2483 to the greenback, or 80.11 U.S. cents, down
0.1 percent.
    The currency traded in a range of C$1.2450 to C$1.2520.
    Still, the loonie gained 0.4 percent for the week.
    Speculators have raised bullish bets on the loonie to the
highest since November 2012, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed.
    As of Oct. 10, Canadian dollar net long positions had edged
up to 76,392 contracts from 75,128 a week earlier.
    The resale of Canadian homes grew 2.1 percent in September
from August, led by gains in Toronto and Vancouver, suggesting
national sales may be stabilizing after cooling sharply in the
spring, the Canadian Real Estate Association said.             
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries after data showing
weaker-than-expected U.S. underlying inflation.
    The two-year            price rose 7.1 Canadian cents to
yield 1.543 percent and the 10-year             climbed 64
Canadian cents to yield 2.034 percent.

 (Reporting by Fergal Smith; Editing by Richard Chang)
  
 

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