May 15, 2018 / 9:28 PM / 2 months ago

CANADA FX DEBT-C$ hits six-day low vs greenback amid NAFTA deadline doubts

 (Adds strategist quote and details on activity; updates prices)
    * Canadian dollar at C$1.2877, or 77.66  U.S. cents
    * Bond prices lower across a steeper yield curve
    * 10-year yield touches four-year high at 2.521 percent

    By Fergal Smith
    TORONTO, May 15 (Reuters) - The Canadian dollar hit a nearly
one-week low against its U.S. counterpart on Tuesday as the
greenback broadly rose and investors weighed prospects of a
deadline being met for a new trade pact between Canada, the
United States and Mexico.
    Mexico's economy minister said he saw diminishing chances
for a new North American Free Trade Agreement ahead of a May 17
deadline to present a deal that could be signed by the current
U.S. Congress.             
    Canada sends about 75 percent of its exports to the United
States, so its economy could benefit if a NAFTA deal is reached.
    "With NAFTA-on, NAFTA-off it places a bit more focus on the
upcoming data that we have later this week and prospective
tightening that is being priced into the curve," said Mazen
Issa, senior FX strategist at TD Securities.
    Chances of a Bank of Canada interest rate hike at the bank's
next policy announcement on May 30 have climbed to about 50
percent from less than 25 percent at the beginning of the month.
          .
    The Bank of Canada appears to be losing sway in its own
backyard as Canadian bond yields chase after rising U.S.
interest rates even though Canadian policy makers have pledged
to proceed slowly with rate hikes of their own.             
    The U.S. dollar        rose against a basket of major
currencies to the highest level since December, as data showing
a pickup in U.S. consumer spending exerted fresh selling
pressure on U.S. government bonds and sent the yield on the
10-year Treasury note to its highest level since July 2011.
            
    At 5 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.5 percent lower at C$1.2877 to the greenback, or 77.66
 U.S. cents. The currency hit its weakest level since Wednesday
at C$1.2924.
    The loonie retreated even as the price of oil, one of
Canada's major exports, rose to multi-year highs. U.S. crude oil
futures        settled 0.5 percent higher at $71.31 a
barrel.            
    Resales of Canadian homes fell 2.9 percent in April from
March to the lowest level in more than five years, the Canadian
Real Estate Association said.             
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year            down 8.5 Canadian
cents to yield 2.041 percent and the 10-year             falling
51 Canadian cents to yield 2.484 percent.
    The 10-year yield touched its highest intraday level since
April 2014 at 2.521 percent.
    Canadian inflation data for April is due on Friday.

 (Reporting by Fergal Smith
Editing by Leslie Adler)
  
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