July 18, 2017 / 9:03 PM / in 5 months

CANADA FX DEBT-C$ touches 14-month high as U.S. dollar slides on Fed, Trump

    * Canadian dollar at C$1.2622 or 79.23 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, July 18 (Reuters) - The Canadian dollar
strengthened on Tuesday against the greenback, which sank to its
weakest level in 10 months against a basket of rivals and helped
steer currency market direction, as uncertainty around hawkish
central banks and U.S. President Donald Trump's agenda weighed.
    At 4 p.m. ET (2000 GMT), the Canadian dollar          was
trading at C$1.2622 to the greenback, or 79.23 U.S. cents, up
0.6 percent.
    Recent gains for the loonie came after the Bank of Canada
raised interest rates last week for the first time since 2010
and signaled it would hike again over the coming months. The
currency has gained roughly 7 percent since the central bank
turned hawkish in June.
    The currency traded between C$1.2581, its strongest level
since early May 2016, and C$1.2702 during the session.
    "I think that (C$1.26) threshold may be acting as an
opportunity to close out or at least take some profit on some
short USD/CAD positions," said Mazen Issa, senior FX strategist
at TD Securities in New York, adding that the Canadian dollar
could also be benefiting from a stronger Australian dollar,
another commodities currency.
    Australia's central bank economic outlook turned more
upbeat, according to minutes from its July meeting, which helped
push the Australian dollar to more than two-year highs.
            
    While other global central banks, including the Bank of
England and the European Central Bank, are also signaling a more
hawkish monetary policy tone, disappointing economic data has
spurred doubt over whether the U.S. Federal Reserve will be able
to raise interest rates again this year.
    Meanwhile, Republican efforts to pass a healthcare overhaul
bill in the U.S. Senate collapsed late on Monday, clouding
expectations over whether Trump will make headway with his
pro-growth agenda. An effort on Tuesday to repeal Obamacare
without replacing it also failed.             
    The U.S. dollar index has fallen 7.4 percent since the start
of the year, partly on the doubts over U.S. President Donald
Trump's fiscal stimulus agenda.       
    Canadian government bond prices were higher across the
maturity curve, with the two-year            price up 1.5
Canadian cents to yield 1.191 percent and the benchmark 10-year
            rising 30 Canadian cents to yield 1.86 percent.

 (Reporting by Solarina Ho; Editing by Jonathan Oatis)
  
 

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