CANADA FX DEBT-C$ dips as oil drop offsets U.S. election uncertainty

Wed Nov 2, 2016 4:43pm EDT
 
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(Adds analyst quotes and details on Fed decision and comments
by Bank of Canada official and updates prices)
    * Canadian dollar ends at C$1.3395, or 74.65 U.S. cents
    * Loonie posts a 3-week high against the Mexican peso
    * Bond prices rise across the yield curve
    * 10-year yield hits a one-week low at 1.170 percent

    By Fergal Smith
    TORONTO, Nov 2 (Reuters) - The Canadian dollar weakened
slightly against its U.S. counterpart on Wednesday as a sharp
drop in oil prices offset broader losses for the greenback amid
U.S. election uncertainty.    
    The U.S. dollar weakened against a basket of major
currencies on nervousness about a potential victory for U.S.
Republican presidential candidate Donald Trump next week.
 
    "The pressure on the big (U.S.) dollar is buffering the
downturn in oil and helping the Canadian dollar remain well
pinned within its recent ranges over the past few days," said
Scott Smith, senior market analyst at Cambridge Global Payments.
    U.S. crude oil futures settled $1.33 lower at $45.34
a barrel after a record weekly build in U.S. crude inventories
stoked investor worries about a global supply glut. 
    Oil is one of Canada's major exports.    
    The Canadian dollar ended at C$1.3395 to the
greenback, or 74.65 U.S. cents, slightly weaker than Tuesday's
close of C$1.3393, or 74.67 U.S. cents.
    The currency's strongest level of the session was C$1.3360,
while its weakest was C$1.3423.            
    The Federal Reserve kept interest rates unchanged in its
last policy decision before the U.S. election, but signaled it
could hike rates in December as the economy gathers momentum and
inflation picks up. 
    A Trump election win that is accompanied by greater market
volatility would reduce the chances of a Fed rate hike in
December, said Smith.
    Against the Mexican peso the loonie touched its
strongest since Oct. 10 at 14.5472 pesos.
    The peso is seen as the chief proxy for market pricing of
Trump's chances of winning.
    Strengthening of the Canadian dollar against the peso adds
to pressure on Canadian exporters who have struggled with weak
growth this year. Canada competes with Mexico for exports to the
United States. 
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year 
price firmed 2 Canadian cents to yield 0.543 percent and the
benchmark 10-year climbed 22 Canadian cents to yield
1.184 percent.
    The 10-year yield hit its lowest intraday since Oct. 26 at
1.170 percent.    
    The Bank of Canada will in the coming months publish the
results of its experiment with a payments system based on the
technology behind the bitcoin virtual currency, Carolyn Wilkins,
senior deputy governor of the Bank of Canada, said. 
  

 (Reporting by Fergal Smith, Editing by W Simon and Sandra
Maler)