December 29, 2017 / 10:02 PM / 21 days ago

CANADA FX DEBT-C$ near flat as bullish bets cut; climbs 7 pct in 2017

 (Adds details on CFTC data and market activity; updates prices)
    * Canadian dollar at C$1.2569, or 79.56 U.S. cents
    * Loonie touches its strongest since Oct. 20 at C$1.2515
    * 2017 gain for the currency is biggest in eight years
    * Bond prices mixed across a steeper yield curve

    By Fergal Smith
    TORONTO, Dec 29 (Reuters) - The Canadian dollar was little
changed against the greenback on Friday as data showed bullish
bets on the currency have been slashed, but the loonie posted a
two-month high earlier in the session and scored its biggest
yearly advance since 2009.    
    At 4 p.m. ET (2100 GMT), the Canadian dollar          was
nearly unchanged at C$1.2569 to the greenback, or 79.56 U.S.
cents. It touched its strongest level since Oct. 20 at C$1.2515.
   
    "The U.S. dollar has been down for several sessions now and
combined with oil prices at $60 ... it has definitely pushed
USD-CAD down to levels that are on the low end of where we think
we'll see it go," said Don Mikolich, executive director, foreign
exchange sales at CIBC Capital Markets.
    The loonie has climbed 7 percent in 2017, its second
straight year of gains as Canada's economy recovered following a
plunge in oil prices.
    U.S. oil prices        have rebounded to reach their highest
since mid-2015, spurred by strong demand and declining global
inventories. They settled on Friday nearly 1 percent higher at
$60.42 a barrel.             
    The U.S. dollar        slipped to its lowest in more than
three months against a basket of major currencies.             
    Domestic data before the Christmas break, which showed an
acceleration in inflation and strength in retail sales, has
helped underpin the loonie by increasing prospects of further
interest rate hikes from the Bank of Canada.
    Money markets expect Canada's central bank to raise rates
three times in 2018, which is more than is expected from the
U.S. Federal Reserve.                     
    "If it wasn't for NAFTA and some other shadows ... one could
become a little bit more bullish on the Canadian dollar,"
Mikolich said.
    U.S. President Donald Trump has threatened to withdraw from
the North American Free Trade Agreement with Canada and Mexico
if he cannot rework it in favor of the United States. Officials
from the three countries will meet in Montreal Jan. 23-28 for
talks on thorny subjects such as autos, dispute settlement and
an expiry clause.
    Speculators have cut bullish bets on the Canadian dollar to
the lowest since July, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed. As of Dec.
26, net long positions had fallen to 17,346 contracts from
45,901 a week earlier.
    Canadian government bond prices were mixed across a steeper
yield curve, with the 10-year             falling 9 Canadian
cents to yield 2.042 percent.   

 (Reporting by Fergal Smith;
Editing by Chizu Nomiyama and Sandra Maler)
  
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