July 16, 2018 / 2:07 PM / 2 years ago

CANADA FX DEBT-C$ edges higher as greenback weakens broadly

    By Gertrude Chavez-Dreyfuss
    July 16 (Reuters) - The Canadian dollar rose against the
U.S. currency on Monday, benefiting from the greenback's overall
weakness, but the outlook remained skewed to the downside amid
global trade tensions with the United States and the European
    In early morning trading, the U.S. dollar was down 0.1
percent at C$1.3142          against the Canadian unit. So far
this year, the Canadian dollar has been down 4.3 percent against
what has been a resurgent greenback.
    Against other currencies such as the euro and sterling, the
Canadian has mostly underperformed on the day.
    "This is mostly U.S.-dollar driven," said Mazen Issa, senior
FX strategist at TD Securities in New York. "It's also the
summer lull so we're seeing pretty much range-bound trading."
    The U.S. dollar was down 0.3 percent against a basket of
currencies at 94.507       , following a slight rebound in risk
appetite that prompted investors to modestly reduce their long
bets on the greenback.
    TD's Issa said the Canadian dollar's outlook remained
downbeat as global trade factors continued to weigh on the
currency, adding that the market has yet to fully price in this
risk for the Canadian currency.
    Last Friday, Italian Deputy Prime Minister Luigi Di Maio
said Italy will not ratify the European Union's free trade
agreement with Canada. The Comprehensive Economic and Trade
Agreement needs to be approved by all 28 EU member states to
take full effect.             
    Canada is also embroiled in its own trade dispute with the
United States amid protracted talks to revamp the North American
Free Trade Agreement. 
    The commodity-based Canadian dollar could also be subject to
price movements in the oil market, analysts said. U.S. crude
futures were down 2.2 percent at $69.45       , which should
keep a lid on the Canadian dollar's gains. 
    After the Bank of Canada raised interest rates last week,
investors are looking to this week's inflation and retail sales
data to gauge whether one more rate hike is possible this year. 
    TD's Issa said there's about a 60 to 65 percent chance of a
Canadian rate increase in December.  
    Meanwhile, Canadian government bond prices were lower across
much of the yield curve in sympathy with U.S. Treasuries.
    The two-year yield            was up slightly at 1.941
percent, while the 10-year             rose to 2.156 percent
from 2.133 percent late on Friday.

 (Reporting by Gertrude Chavez-Dreyfuss in New York
Editing by Susan Thomas)
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