CANADA FX DEBT-C$ climbs to one-week high as trade fears abate

Wed Jan 25, 2017 4:30pm EST
 
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(Adds portfolio manager quote, details on Canada's stock
market; updates prices)
    * Canadian dollar at C$1.3067, or 76.53 U.S. cents
    * Loonie touches its strongest since Jan. 18 at C$1.3062
    * Canadian bond prices lower across a steeper yield curve
    * 10-year yield touches a 1-month high

    By Fergal Smith
    TORONTO, Jan 25 (Reuters) - The Canadian dollar strengthened
to a one-week high against its U.S. counterpart on Wednesday as
investor fears of a more unfavorable trade outlook for Canada
abated and the greenback suffered broader losses.
    The U.S. dollar hit a nearly seven-week low against a
basket of currencies, pressured by lingering concerns about U.S.
President Donald Trump's protectionist stance. 
    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. 
    "There might be a new trade deal coming down the pipe but
expectations are that it would be beneficial for both parties
(Canada and the United States)," said Hosen Marjaee, senior
managing director at Manulife Asset Management.    
    Trump signed orders on Tuesday smoothing the path for the
Keystone XL pipeline, giving a lift to the shares of Canada's
energy companies and helping to push the country's benchmark
stock index to a near record high.
    If constructed, Keystone 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.
    The Canadian dollar ended at C$1.3067 to the
greenback, or 76.53 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$1.3062.
    Oil clawed back earlier losses even after data showed a
build in U.S. crude inventories, reinforcing traders' sentiment
that oil is trapped in a range by expected OPEC production cuts
and U.S. output growth. 
    U.S. crude oil futures settled unchanged at $53.18 a
barrel.
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries as record highs on
Wall Street reduced demand for safe haven assets, such as bonds.
 
    The two-year fell 5.5 Canadian cents to yield
0.819 percent and the 10-year declined 54 Canadian
cents to yield 1.823 percent.
    The 10-year yield touched its highest intraday since Dec. 22
at 1.830 percent.

 (Reporting by Fergal Smith; Editing by Alistair Bell)