January 19, 2018 / 10:13 PM / 3 months ago

CANADA FX DEBT-C$ slips ahead of NAFTA talks as oil prices fall

 (Adds strategist quote and details on market activity; updates
prices)
    * Canadian dollar at C$1.2507, or 79.96 U.S. cents
    * Oil price falls 0.9 percent
    * Bond prices mixed across a steeper yield curve
    * 10-year yield posts a three-year high intraday at 2.242
percent

    By Fergal Smith
    TORONTO, Jan 19 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as lower oil prices
offset domestic data showing the biggest increase in factory
sales in 2-1/2 years, while investors prepared for another round
of NAFTA talks next week.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading at C$1.2507 to the greenback, or 79.96 U.S. cents, down
0.7 percent.
    The currency traded in a range of C$1.2400 to C$1.2508. For
the week, it fell 0.4 percent.
    "The market is really going to have to price in a negative
risk premium on the Canadian dollar, driven primarily on the
breakup risks of NAFTA," said Mark McCormick, North American
head of FX strategy at TD Securities.
    On Wednesday, the Bank of Canada raised its benchmark
interest rate by 25 basis points to 1.25 percent, its highest
since January 2009.
    But expectations for additional rate hikes over the coming
months were tempered after the central bank said the future of
the North American Free Trade Agreement was the most significant
downside risk the economy faced. Canada sends about 75 percent
of its exports to the United States.
    The sixth round of talks on renegotiating the North American
Free Trade Agreement, or NAFTA, is due to take place in Montreal
from Jan. 23-29.    
    Speculators have raised bullish bets on the Canadian dollar
for the second straight week, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed. As
of Jan. 16, net long positions had edged up to 17,556 contracts
from 17,461 a week earlier.    
    Canadian manufacturing sales jumped 3.4 percent in November
on strength in transportation equipment and petroleum and coal
products, Statistics Canada said. Analysts in a Reuters poll had
forecast a 2.0 percent gain.             
    U.S. crude        prices settled 0.9 percent lower at $63.37
a barrel as investors sold positions on re-emerging U.S.
production concerns.             
     Foreign investment in Canadian securities, particularly
bonds, remained strong in November and was on track to hit an
annual record, separate data showed.             
    Canadian government bond prices were mixed across a steeper
yield curve. The two-year            rose 1.5 Canadian cents to
yield 1.804 percent, while the 10-year             fell 15
Canadian cents to yield 2.242 percent, its highest since
September 2014.

 (Reporting by Fergal Smith; Editing by Phil Berlowitz and Lisa
Shumaker)
  
 
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