July 19, 2018 / 8:45 PM / 2 months ago

CANADA FX DEBT-C$ tumbles vs U.S. dollar as trade woes, commodities weigh

    * Canadian dollar outlook dimmed by trade tensions
    * Commodities down as metals, Brent crude fall
    * Spread between U.S.-Canadian 10-year yields narrows at
close

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    July 19 (Reuters) - The Canadian dollar fell to a three-week
low against the U.S. dollar on Thursday, knocked lower by weaker
commodity prices and lingering uncertainty about global trade
after President Donald Trump earlier said that the United States
wants to negotiate bilateral deals with Canada and Mexico.
    Trump roiled markets again on Thursday when he voiced his
concerns about a strong dollar and the U.S. Federal Reserve's
interest rate increases.             
    His comments caused a stir in the currency market, initially
pushing the greenback off a one-year peak against a basket of
major currencies.
    The impact on the Canadian dollar was brief, however, as the
loonie pared some of its losses. 
    In late trading, the U.S. dollar was still up 0.8 percent
against the Canadian currency to C$1.3270         , after
earlier hitting a three-week peak of $1.3290. So far this year,
the Canadian dollar has struggled, falling 5.5 percent against
the greenback.
    Against a basket of six major currencies, the U.S. dollar
rebounded to a gain of 0.2 percent to 95.25       .
    Lower commodity prices weighed on the Canadian currency,
analysts said, as precious metals prices were down with gold
          and silver           on the defensive. 
    Benchmark Brent crude oil         was also lower, ending the
session down 0.5 percent at $72.55 per barrel. 
    Brent has fallen almost 9 percent since last week, when it
reached a high above $79 on emerging evidence of higher
production from Saudi Arabia and other OPEC producers.
    Global trade issues, meanwhile, remained a headwind for the
Canadian dollar.
    A day after Trump said he may negotiate separate trade deals
with North American Free Trade Agreement (NAFTA) partners Mexico
and Canada, Canada's Ambassador to the United States David
MacNaughton said he was confident that talks to modernize NAFTA
would maintain the trilateral nature of the pact.             
    Daniel Katzive, head of North America FX strategy, at BNP
Paribas said he expects global trade tensions to get worse
before they get better, which should support the U.S. dollar in
the next quarter. He expects the greenback to hit C$1.35 against
the Canadian dollar by the end of the third quarter. 
    Meanwhile, Canadian government bond prices rose and yields
fell, tracking the U.S. Treasury debt market.
    The two-year yield            fell to 1.931 percent,
compared with 1.953 percent late on Wednesday, while the 10-year
            was down at 2.109 percent from Wednesday's 2.149
percent.
    The spread between the U.S. benchmark 10-year Treasury note
and Canadian 10-year yields narrowed slightly on Thursday to
73.57 basis points              . The yield gap, however, has
widened since the beginning of the year in favor of the U.S.
dollar.

 (Reporting by Gertrude Chavez-Dreyfuss, editing by G Crosse)
  
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