CANADA FX DEBT-C$ dips as safe-haven currencies outperform
* Canadian dollar at C$1.3626, or 73.39 U.S. cents * Bond prices higher across a flatter yield curve * Gap between 2- and 10-year yields narrowest in 2 weeks TORONTO, May 17 (Reuters) - The Canadian dollar pared some of this week's gains on Wednesday against its U.S. counterpart as political uncertainty in Washington supported safe-haven currencies, while domestic manufacturing sales rose in line with economists' expectations. Manufacturing sales rebounded 1.0 percent in March, driven by gains in the motor vehicle sector and record sales in the food industry, data from Statistics Canada showed. The yen and the Swiss franc outperformed as the U.S. dollar fell against a basket of major currencies. Talk that President Donald Trump could face the threat of impeachment weighed on risk-sensitive assets, including richly valued stocks. At 8:58 a.m. ET (1258 GMT), the Canadian dollar was trading at C$1.3626 to the greenback, or 73.39 U.S. cents, down 0.1 percent, according to Reuters data. The currency, which has gained 0.6 percent this week, traded in a range of C$1.3580 to C$1.3638. Losses for the loonie came even as prices of oil, one of Canada's major exports, climbed. U.S. crude prices were up 0.37 percent at $48.84 a barrel ahead of U.S. crude inventory data that could give investors a clue as to whether an Organization of the Petroleum Exporting Countries-led output cut is making progress in reducing the persistent global supply overhang. A more uncertain trade outlook with the United States and troubles at an alternative mortgage lender had helped pressure the Canadian dollar to a 14-month low at C$1.3793 earlier this month. Mexican Economy Minister Ildefonso Guajardo said on Tuesday he expects Trump's administration to tell Congress early next week of plans to renegotiate the North American Free Trade Agreement, a move that would produce talks by late August. Also on Tuesday, Canada's biggest non-bank lender Home Capital Group Inc published data showing its deposit balances were continuing to decline. Canadian government bond prices were higher across a flatter yield curve, with the two-year up 4.5 Canadian cents to yield 0.678 percent and the 10-year climbing 48 Canadian cents to yield 1.520 percent. The gap between 2-year and 10-year yields narrowed by 3 basis points to a spread of 84.2 basis points, its narrowest since May 2, as longer-dated bonds outperformed. (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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