May 25, 2017 / 1:56 PM / 2 months ago

CANADA FX DEBT-C$ pulls back from 5-week high as oil prices slide

3 Min Read

    * Canadian dollar at C$1.3431, or 74.45 U.S. cents
    * Loonie touches its strongest since April 19 at C$1.3388
    * Bond prices mixed across a flatter yield curve
    * 2-year spread vs Treasuries hits narrowest in 3 weeks

    TORONTO, May 25 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday, pulling back from a
five-week high as oil prices fell after OPEC signaled it would
go no further with production cuts than markets previously
expected.
    U.S. crude        prices were down 0.84 percent at $50.93 a
barrel even as Organization of the Petroleum Exporting Countries
delegates said that the producer group had decided to extend
cuts to March. Some investors have been hoping it would reduce
output even further to drain stocks more quickly.             
    At 9:19 a.m. ET (1319 GMT), the Canadian dollar          was
down 0.2 percent at C$1.3431 to the greenback, or 74.45 U.S.
cents.
    The currency's weakest level of the session was C$1.3449,
while it touched its strongest since April 19 at C$1.3388.
    On Wednesday, the Bank of Canada was more upbeat about the
economy than some investors had expected as it left interest
rates unchanged at 0.5 percent. The central bank reiterated its
position that excess capacity remains in the economy, but it
dropped a reference to slack being "material" and noted strong
spending by Canadians along with a housing boom and job growth.
            
    Dallas Federal Reserve Bank President Robert Kaplan said
late on Wednesday that he felt "very strongly" that U.S. trade
relationships with Canada and Mexico help U.S. competitiveness.
The remarks came as U.S. President Donald Trump looks at
renegotiating the North American Free Trade Agreement.
            
    Canadian government bond prices were mixed across a flatter
yield curve. The two-year            dipped 1.5 Canadian cents
to yield 0.724 percent, and the 10-year             rose 7
Canadian cents to yield 1.471 percent.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed by 1.7 basis points to a spread of -57.3
basis points, its smallest gap since May 1. Shorter-dated
Canadian bonds have increasingly underperformed since
Wednesday's rate decision by the Bank of Canada.

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

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