March 27, 2019 / 9:01 PM / 3 months ago

CANADA FX DEBT-C$ weakens as oil falls, bond yields extend decline

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar weakens 0.2 percent against greenback
    * Canada's trade deficit narrows in January to C$4.25
billion
    * Canadian bond prices rise across yield curve
    * Canada 10-year yield extends fall below yield on 3-month
T-bill

    By Fergal Smith
    TORONTO, March 27 (Reuters) - The Canadian dollar edged
lower against its U.S. counterpart on Wednesday as oil prices
fell and bond yields hit new lows, while data showed
less-than-expected improvement in Canada's trade deficit.
    At 4:23 p.m. (2023 GMT), the Canadian dollar          was
trading 0.2 percent lower at 1.3406 to the greenback, or 74.59
U.S. cents. The currency, which on Monday touched a two-week low
at 1.3445, traded in a range of 1.3377 to 1.3440.
    "Dollar-Canada, pretty much like everything else, is stuck
in a range," said Shaun Osborne, chief currency strategist at
Scotiabank.
    Major currency markets were quiet as risk appetite remained
fragile following a sell-off last week triggered by fears of
slowing global growth.             
    Canada's 10-year yield fell 3.6 basis points further below
the yield on the three-month T-bill to a spread of -12.0 basis
points. An inverted yield curve is seen by some investors as a
leading indicator of recession.
    The price of oil, one of Canada's major exports, fell after
government data showed U.S. crude inventories grew more than
expected last week as a Texas chemical spill hampered exports.
U.S. crude oil futures        settled 0.9 percent lower at
$59.41 a barrel.                    
    Canada's trade deficit narrowed in January to C$4.25
billion, as exports grew at a faster rate than imports,
Statistics Canada said. Analysts had forecast a deficit of
C$3.50 billion.             
    "The gain in real exports was somewhat constructive for the
Canadian growth picture," Osborne said. "Incrementally, we are
getting a little bit more evidence in the early part of Q1 (the
first quarter) that growth is picking up a little bit." 
    Separate data from Statistics Canada showed that non-farm
payroll employees rose by 71,200 in January from December. A
previously released monthly survey from Statistics Canada, the
Labour Force Survey, also showed strong job gains at the start
of the year.
    Canada's gross domestic product data for January is due on
Friday.    
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 7.5 Canadian cents to yield 1.467 percent and the 10-year
            was up 33 Canadian cents to yield 1.538 percent.
    The 10-year yield touched its lowest intraday level since
June 2017 at 1.508 percent.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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