January 23, 2017 / 9:52 PM / 6 months ago

CANADA FX DEBT-C$ gains as NAFTA fears abate; oil slips

3 Min Read

(Adds strategist comment, details on NAFTA talk, updates
prices)
    * Canadian dollar settles at C$1.3267, or 75.37 U.S. cents
    * Bond prices higher across the yield curve

    By Alastair Sharp
    TORONTO, Jan 23 (Reuters) - The Canadian dollar strengthened
against a broadly weaker U.S. dollar on Monday, as an advisor to
U.S. President Donald Trump said Canada has a "very special
status" and is unlikely to be hard hit by any changes to the
NAFTA trade accord.
    Trump pulled the United States out of the Trans-Pacific
Partnership on Monday and has threatened to rip up the North
American Free Trade Agreement -- signed in 1994 by the United
States, Canada and Mexico -- if it cannot be retooled to better
serve U.S. interests.
    "Canada finds itself, frankly, in a really very special
status," Stephen Schwarzman, who heads a business advisory
council but holds no formal role in the Trump administration,
told reporters after meeting with Prime Minister Justin Trudeau
and his cabinet. 
    The Canadian dollar settled at C$1.3267 to the
greenback, or 75.37 U.S. cents, stronger than Friday's close of
C$1.3315, or 75.10 U.S. cents.
    "We're getting a more, dare I say, agreeable Trump
administration that is leaning towards renegotiating NAFTA as
opposed to just outright terminating it," said Bipan Rai, a
senior macro strategist at CIBC Capital Markets.
    "We do still have the matter of the border tax adjustment,
which will be important to keep an eye on going forward," Rai
added.
    Trump told U.S. manufacturing executives on Monday that he
would impose a hefty border tax on firms that import products
into the United States after moving American factories overseas.
 
    Canada sends more than 75 percent of its exports to the
United States, and the Bank of Canada warned last week there
would be "material consequences" if Trump enacts protectionist
policies as it left the door open to an interest rate cut.
    Prices of oil, one of Canada's major exports, fell as signs
of a strong recovery in U.S. drilling activity outweighed news
that Organization of the Petroleum Exporting Countries and
non-OPEC producers were on track to meet output reduction goals
set in December. 
    The pace of Canadian wholesale trade cooled more than
expected in November amid declines in the motor vehicle and
parts sector, data from Statistics Canada showed. 
    The soft figures came after strong October growth, which was
revised up to 1.3 percent from the previously reported 1.1
percent.
    Canadian government bond prices rose across the yield curve,
with the two-year up 4 Canadian cents to yield 0.752
percent and the 10-year rising 59 Canadian cents to
yield 1.681 percent.

 (Additional reporting by Fergal Smith; Editing by Lisa Von Ahn
and Sandra Maler)

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