June 19, 2018 / 8:55 PM / 5 months ago

CANADA FX DEBT-C$ drops to near one-year low as trade tensions weigh on oil

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar at C$1.3287, or 75.26 U.S. cents
    * Loonie hits weakest in nearly a year at C$1.3291
    * Price of U.S. oil falls 1.2 percent
    * Bond prices higher across a flatter yield curve

    By Fergal Smith
    TORONTO, June 19 (Reuters) - The Canadian dollar weakened to
a nearly one-year low against its U.S. counterpart on Tuesday as
an escalating trade dispute between the United States and China
pressured global stock and commodity markets.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.6 percent lower at C$1.3287 to the greenback, or 75.26
U.S. cents.
    The loonie, which is sensitive to movement in crude oil
prices, touched its weakest level since June 23, 2017 at
C$1.3291.   
    "This was probably a decline related to commodity prices,"
said Colin Cieszynski, chief market strategist at SIA Wealth
Management. "The trade news devastated commodities today." 
    Equity and oil prices fell after U.S. President Donald Trump
on Monday threatened to impose a 10 percent tariff on $200
billion of Chinese goods, which Beijing warned it would fight
back against with "qualitative" and "quantitative" measures.
                        
    Investors have been concerned the trade spat between the two
economic giants could slow global growth.    
    U.S. crude oil futures        settled 1.2 percent lower at
$65.07 a barrel. Oil is one of Canada's major exports.
    Canada runs a current account deficit, so its currency tends
to weaken when risk appetite sours. The country has its own
trade feud with the United States and is in slow-moving talks
with the U.S. and Mexico to revamp the North American Free Trade
Agreement.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with Treasuries as the trade spat lifted
demand for safe-haven assets.
    The two-year            rose 5.5 Canadian cents to yield
1.843 percent and the 10-year             climbed 36 Canadian
cents to yield 2.162 percent.
    The two-year yield fell 2.1 basis points further below its
U.S. equivalent to a spread of -70.6 basis points, its widest
since March 2007.
    Canadian inflation data for May and the April retail sales
report are due out on Friday.

 (Reporting by Fergal Smith
Editing by Tom Brown)
  
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