CANADA FX DEBT-C$ weakens as oil falls, Fed minutes eyed

Tue Oct 11, 2016 4:50pm EDT
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(Adds strategist comment, updates prices to close)
    * Canadian dollar settles at C$1.3241, or 75.52 U.S. cents
    * Bond prices lower across steeper yield curve
    * 10-year yield touches almost four-week high at 1.257

    By Alastair Sharp
    TORONTO, Oct 11 (Reuters) - The Canadian dollar on Tuesday
reversed most of the gains it made against the greenback the
previous day, as oil prices fell and investors boosted the U.S.
currency on increased bets that the U.S. Federal Reserve will
raise interest rates in December.
    The Canadian dollar settled at C$1.3241 to the
greenback, or 75.52 U.S. cents, weaker than Monday's close of
C$1.3175, or 75.90 U.S. cents, according to Reuters data.
    Monday's gain was the loonie's biggest one-day rally since
June, as oil surged and doubts grew over Republican presidential
candidate Donald Trump's prospects to win the White House in the
Nov. 8 election. Trump has said he would renegotiate or scrap
the North American Free Trade Agreement if he is elected. 
    The loonie's official close on Friday was C$1.3285 to the
greenback, or 75.27 U.S. cents. Monday was a market holiday in
    "There's a risk aversion in the market," said Brad Schruder,
director of corporate sales and structuring at BMO Capital
Markets. "I'm not sure whether it's anything more than
position-squaring ahead of the Fed minutes tomorrow."
    The U.S. dollar surged to a seven-month high against a major
currency basket, and could push even higher if Wednesday's
release of minutes from the Fed's latest monetary policy meeting
confirms the market's December rate hike view. 
    Oil prices retreated from one-year highs after OPEC said it
was trying to reach a global agreement to cap production for at
least six months amid doubts about how much that would reduce a
crude glut. 
    The Canadian currency's strongest level of the session was
C$1.3164, while its weakest was C$1.3274.
    Against the euro, the loonie touched its strongest level
since Sept. 9 at C$1.4602.
    Canadian housing starts surged in September compared with
August, the national housing agency reported on Tuesday. The
seasonally adjusted annualized rate of housing starts rose to
220,617 units from a 184,201-unit rate in August. 
    The stronger-than-expected housing starts followed data on
Friday that showed the economy created 67,200 jobs in September,
far more than expected.
    Speculators increased bearish bets on the Canadian dollar,
Commodity Futures Trading Commission data showed on Friday.
    Canadian government bond prices fell across the yield curve,
with the two-year off 2 Canadian cents to yield 0.603
percent and the benchmark 10-year down 28 Canadian
cents to yield 1.200 percent.
    The 10-year yield touched its highest level since Sept. 14
at 1.257 percent.

 (Additional reporting by Fergal Smith; Editing by Paul Simao
and Meredith Mazzilli)