May 9, 2019 / 8:38 PM / 4 months ago

Canadian dollar recovers from two-week low as trade signals drive FX market

TORONTO (Reuters) - The Canadian dollar rose against its U.S. counterpart on Thursday, rebounding from an earlier two-week low ahead of domestic jobs data and as the U.S.-China trade conflict weighed on the greenback against other safe-haven currencies.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch/File Photo

Global equities slumped to a more than five-week low after U.S. President Donald Trump ratcheted up trade tensions with China ahead of a high-stakes negotiation.

Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt by a slowdown in the global flow of capital or trade.

“The price action is being completely driven by the pending decision of whether or not the White House will raise taxes on Chinese goods,” said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets

“Long (U.S.) dollar positions were trimmed against other safe-haven currencies, such as the Japanese yen and the Swiss franc. That prompted some U.S. dollar weakness across the board and goes a long way to explaining why the Canadian dollar is slightly better on the day,” Schruder said.

The U.S. dollar declined against a basket of major currencies, while the price or oil, one of Canada’s major exports, settled 0.7% lower at $61.70 a barrel.

Still, oil pared earlier losses after Trump revived investor hopes that the United States might not raise tariffs on Chinese imports.

At 4:03 p.m. (2003 GMT), the Canadian dollar was trading 0.1% higher at 1.3461 to the greenback, or 74.29 U.S. cents. Earlier in the session, the currency touched its weakest level since April 25 at 1.3505.

Canada’s trade deficit in March shrank slightly to C$3.21 billion as higher energy shipments helped exports increase at a slightly faster rate than imports, Statistics Canada said. The deficit was greater than the C$2.45 billion shortfall that analysts had predicted.

Separate data showed that new housing prices in Canada were unchanged in March for the seventh month out of eight, with little or no growth in the major markets of Toronto and Vancouver.

Canada’s jobs report for April is due on Friday, which could help guide expectations for future interest rate decisions from the Bank of Canada.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 2.7 Canadian cents to yield 1.583% and the 10-year climbed 20 Canadian cents to yield 1.685%.

Reporting by Fergal Smith; Editing by David Gregorio and Peter Cooney

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