November 15, 2017 / 9:59 PM / 3 years ago

CANADA FX DEBT-C$ drops to one-week low as oil and stocks slide

 (Adds strategist comment, details, updates prices)
    * Canadian dollar at C$1.2765, or 78.34 U.S. cents
    * Loonie touches its weakest since Nov. 7 at C$1.2789
    * Oil falls for fourth straight day
    * Bond prices higher across a flatter yield curve

    By Alastair Sharp
    TORONTO, Nov 15 (Reuters) - The Canadian dollar weakened to
a one-week low against its U.S. counterpart on Wednesday as oil
and stocks fell and investors weighed trade uncertainties ahead
of fresh NAFTA talks.
    At 4 p.m. ET (2100 GMT), the Canadian dollar          was
trading at C$1.2765 to the greenback, or 78.34 U.S. cents, down
0.3 percent.
    "There was modest Canadian dollar weakness on the day," said
Eric Theoret, currency strategist at Scotiabank, citing
nervousness in the market ahead of the latest round of NAFTA
    The Mexican peso        meanwhile hit its weakest against
the greenback since March before paring some losses.
    On Tuesday, Canada launched a NAFTA challenge of a U.S.
decision earlier this month to impose duties on softwood lumber
exports from its northern neighbor.             
    NAFTA working groups are due to begin meeting from Wednesday
in Mexico. Talks will begin on Friday and continue through Nov.
    The Canadian currency's strongest level of the session was
C$1.2714, while it touched its weakest since Nov. 7 at C$1.2789.
    Prices of oil, one of Canada's major exports, slipped for a
fourth day on a gloomy outlook for oil demand growth from the
International Energy Agency.             
    World stocks registered their longest losing streak in eight
months, while the U.S. dollar        recovered early losses
against a basket of major currencies as U.S. data boosted
expectations for further Federal Reserve interest rate hikes.
    "For us, it's still a spread story rather than a commodity
story," Theoret said, pointing to a widening gap between higher
yields on U.S. two-years bonds versus their Canadian
    Less stimulus will be required over time but the Bank of
Canada will remain cautious as it considers future interest rate
moves, Senior Deputy Governor Carolyn Wilkins said, reiterating
the central bank's recent dovish tone.             
    Wilkins will speak about monetary policy amid uncertainty on
Wednesday evening in New York.
    Canada's manufacturing sales data for September is due on
Thursday and an October inflation report will be released on
    "For Canada, the vulnerability would be to an upward
surprise" in inflation, Theoret said, given the weakening trend
in the currency since September's surprise Bank of Canada
decision to hike rates.
    Canadian government bond prices were higher across the yield
curve, with the two-year            rising 2.5 Canadian cents to
yield 1.448 percent and the 10-year             up 31 Canadian
cents to yield 1.914 percent.
    In domestic data, resales of Canadian homes rose 0.9 percent
in October from September, the third straight monthly rise.

 (Additional reporting by Fergal Smith; Editing by Bernadette
Baum and James Dalgleish)
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