January 25, 2017 / 2:43 PM / 7 months ago

CANADA FX DEBT-C$ strengthens to 1-week high as greenback dips

* Canadian dollar at C$1.3121, or 76.21 U.S. cents
    * Bond prices lower across the yield curve

    TORONTO, Jan 25 (Reuters) - The Canadian dollar strengthened
to a one-week high against its U.S. counterpart on Wednesday,
one day after U.S. President Donald Trump revived prospects for
the Keystone XL pipeline and as the greenback suffered broader
losses.
    The U.S. dollar tumbled to a seven-week low against a
basket of currencies on worries that Trump was focusing too much
on protectionism and isolationism, and not enough on pro-growth
policies. 
    A more protectionist United States would threaten Canada's
economy. But Canadian officials are convinced Mexico will suffer
the most damage from changes to the North American Free Trade
agreement, under which Canada sends 75 percent of its exports to
the United States. 
    Trump signed orders on Tuesday smoothing the path for
Keystone. If constructed, the pipeline would provide oil
producers in Canada with a quicker route to send crude to U.S.
Gulf Coast refiners. Oil is one of Canada's major exports.
    At 9:24 a.m. ET (1424 GMT), the Canadian dollar was
trading at C$1.3121 to the greenback, or 76.21 U.S. cents,
stronger than Tuesday's close of C$1.3161, or 75.98 U.S. cents.
    The currency's weakest level of the session was C$1.3163,
while it touched its strongest since Jan. 18 at C$1.3087.
    Gains for the Canadian dollar came even as oil fell. U.S.
crude prices were down 1.03 percent at $52.63 a barrel
after builds in U.S. inventories reinforced expectations that
increasing shale output this year would reduce the impact of
production cuts by Organization of the Petroleum Exporting
Countries and other major exporters. 
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries as gains for global
stocks reduced investor demand for safe-haven assets, such as
bonds. 
    The two-year fell 3.5 Canadian cents to yield
0.809 percent, and the 10-year declined 33 Canadian
cents to yield 1.798 percent, its highest since Dec. 28.

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn)

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