November 14, 2017 / 9:42 PM / 3 years ago

CANADA FX DEBT-C$ falls against weaker greenback as oil prices weigh

 (Adds strategist comment, updates prices)
    * Canadian dollar at C$1.2735, or 78.52 U.S. cents
    * Loonie touches its weakest since Wednesday at C$1.2773
    * Bond prices higher across much of the yield curve

    By Alastair Sharp
    TORONTO, Nov 14 (Reuters) - The Canadian dollar weakened
slightly versus a broadly lower U.S. currency on Tuesday, as a
sharp drop in oil prices weighed on the currency of Canada, a
major crude exporter.
    Oil prices fell more than 2 percent, their third day of
declines, as signs of rising U.S. supply and a gloomy outlook
for global demand weighed.      
    That offset the benefit for the loonie from broader
greenback weakness after strong German data pushed the euro to a
2-1/2 week high.             
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading at C$1.2735 to the greenback, or 78.52 U.S. cents, down
marginally on the day. 
    The currency's strongest level of the session was C$1.2701,
while it touched its weakest since last Wednesday at C$1.2773.  
    Still, with the U.S. currency boosted by a recent uptick in
economic data and the Canadian dollar hit by signs of slowing
growth, the loonie could stand to benefit from broader global
reflation and any increase in oil prices from here.
    "We're at a turning point where usually U.S. (economic) data
momentum starts to decelerate and momentum in Canada would start
to accelerate," said Mark McCormick, North American head of FX
strategy at TD Securities, which is recommending clients
position for the Canadian currency to strengthen to C$1.2380.
    "There's a lot of good news priced into the U.S. (dollar),
and a lot of bad news priced into Canada," he said. "There's
scope to price in a little bit more from the Bank of Canada
early in the year. We're looking for them to hike (interest
rates) in January."
    The Canadian dollar is unlikely to recapture its tight link
with the price of oil even as the interest rate outlook settles,
given that crude trades are far removed from levels needed to
affect investment in Canada's energy sector, economists and
strategists say.             
    Speculators have cut bullish bets on the Canadian dollar,
U.S. Commodity Futures Trading Commission data and Reuters
calculations showed on Monday.              
    Canadian government bond prices were flat to higher across
the yield curve, with the two-year            unchanged to yield
1.463 percent and the 10-year             up 17 Canadian cents
to yield 1.949 percent.
    Canada's manufacturing sales data for September is due on
Thursday and the October inflation report will be released on
    U.S., Canadian and Mexican negotiators hope to make modest
progress in the next round of North American Free Trade
Agreement talks in Mexico City this week.             

 (Additional reporting by Fergal Smith; Editing by Rosalba
O'Brien and Jonathan Oatis)
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