January 18, 2018 / 10:06 PM / in 5 months

CANADA FX DEBT-C$ steadies as investors shrug off NAFTA worries

    * Canadian dollar at C$1.2419, or 80.52 U.S. cents
    * Bond prices lower across much of the yield curve
    * Canada-U.S. 10-year spread widens by 2.9 basis points

    By Fergal Smith
    TORONTO, Jan 18 (Reuters) - The Canadian dollar steadied
against its American counterpart on Thursday, after volatile
trading the day before when the Bank of Canada raised interest
rates, as investors shrugged off worries that the United States
will pull out of NAFTA.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading at C$1.2419 to the greenback, or 80.52 U.S. cents, up
0.1 percent. The currency traded in a range of C$1.2414 to
C$1.2489.
    "The Canadian dollar has been very well supported," said    
Colin Cieszynski, chief market strategist at The Fundamental
Technician. "In time, I think the Canadian dollar can continue
to work higher as people anticipate further Canadian rate
hikes."
    On Wednesday, the Bank of Canada raised its benchmark
interest rate by 25 basis points to 1.25 percent, its highest
since January 2009, after recent data showed stronger inflation
and strong job growth.             
    The future of the North American Free Trade Agreement was
the most significant downside risk cited by the central bank.
Canada sends about 75 percent of its exports to the United
States.
    U.S. President Donald Trump on Wednesday said that
terminating NAFTA would result in the "best deal" to revamp the
24-year-old trade pact with Canada and Mexico in favor of U.S.
interests.             
    "For the last three weeks now the (Mexican) peso has been on
fire, which says to me that the NAFTA concerns are a bit
overblown," Cieszynski said.      
    The price of oil, one of Canada's major exports, was little
changed as the market remained wary of increased supply from the
United States. U.S. crude oil futures        settled 2 cents
lower at $63.95 a barrel.                 
    Canadian government bond prices were lower across much of
the yield curve, with the two-year            down 4 Canadian
cents to yield 1.809 percent and the 10-year             falling
11 Canadian cents to yield 2.219 percent.
    The 10-year yield touched its highest intraday since
September 2014 at 2.232 percent. Still, the gap between it and
its U.S. equivalent widened by 2.9 basis points to a spread of
-40.3 basis points, its widest since Dec. 27.
    A report by ADP showed that Canada shed 7,100 jobs in
December, driven by cuts in the manufacturing, education and
trade sectors.             

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and Grant
McCool)
  
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