February 14, 2017 / 10:21 PM / 7 months ago

CANADA FX DEBT-C$ pulls back from 1-week high as Yellen boosts greenback

 (Adds analyst quotes and details throughout; updates prices)
    * Canadian dollar ends at C$1.3071, or 76.51 U.S. cents
    * Loonie touches its strongest since Feb. 6 at C$1.3025
    * Bond prices end lower across the yield curve
    * 10-year yield touches its highest since Feb. 3 at 1.793
percent

    By Fergal Smith
    TORONTO, Feb 14 (Reuters) - The Canadian dollar posted a
fresh one-week high against its U.S. counterpart on Tuesday as
oil rose but gains were mostly reversed as testimony by Federal
Reserve Chair Janet Yellen boosted the greenback.
    Gains for the loonie came one day after U.S. President
Donald Trump said he only wants to tweak trade ties with Canada.
            
    "A very disruptive trade agenda could have prompted the Bank
of Canada to cut rates," Jean said.
    Still, Trump's pledge to renegotiate the North American Free
Trade Agreement (NAFTA) to focus on Mexico is almost impossible
and Canada will not emerge unscathed, Canadian officials and
trade experts said.
    Canada sends 75 percent of its exports to the United States.
    A proposed U.S. border adjustment tax would reduce Canada's
real gross domestic product by almost 1 percent, the C.D. Howe
Institute said in a research report.
    U.S. crude        prices settled 27 cents higher at $53.20 a
barrel, but some gains were pared amid concerns about rising
supply from U.S. shale output.      
    Oil is one of Canada's major exports.
    The Canadian dollar          ended at C$1.3071 to the
greenback, or 76.51 U.S. cents, slightly stronger than Monday's
close of C$1.3075, or 76.48 U.S. cents.
    The currency's weakest level of the session was C$1.3107,
while it touched its strongest since Feb. 6 at C$1.3025.       
    The U.S. dollar        rallied against a basket of major
currencies as investors raised their outlook on a faster pace of
U.S. rate increases.             
    "We are seeing a response to Janet Yellen's comments leaving
the door wide open for a potential rate hike as soon as March,"
said Jimmy Jean, senior economist at Desjardins.
    The chances of a Fed rate hike in March rose to nearly 18
percent from 13 percent the day before, according to the CME
Group's FedWatch tool.        
    In domestic data, home prices rose 0.5 percent in January
and 13.0 percent from a year earlier as values in the hot
Toronto market climbed even further and those in Vancouver
picked up after three months of declines, the Teranet-National
Bank Composite House Price Index showed.             
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries on Yellen's more
hawkish-than-expected tone. The two-year            dipped 2.5
Canadian cents to yield 0.799 percent and the 10-year
            declined 28 Canadian cents to yield 1.765 percent.
    The 10-year yield touched its highest intraday since Feb. 3
at 1.793 percent.

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn and
Jonathan Oatis)
  
 

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