July 30, 2018 / 7:47 PM / 2 years ago

CANADA FX DEBT-C$ climbs to 7-week high on NAFTA optimism, oil rally

 (New throughout)
    * Canadian dollar at C$1.3025, or 76.78 U.S. cents
    * Price of U.S. oil rises 2.1 percent
    * Bond prices mixed across a steeper yield curve
    * 10-year yield touches its highest in nearly seven weeks

    By Fergal Smith
    TORONTO, July 30 (Reuters) - The Canadian dollar
strengthened to a nearly seven-week high against its U.S.
counterpart on Monday, boosted by higher oil prices and optimism
that progress could be made in talks to revamp the NAFTA trade
    Negotiations to update the North American Free Trade
Agreement had stalled since June when the United States imposed
tariffs on Mexican and Canadian steel and aluminum. But Mexico
and the United States have agreed to step up talks in hopes of
reaching an agreement on major issues by August.             
    "The negotiations have been reinvigorated," said Scott
Smith, managing partner at Viewpoint Investment Partners. "We
are seeing some of this NAFTA risk premium in the Canadian
dollar evaporate as we get closer to a potential deal."
    The price of oil, one of Canada's major exports, rose as
traders kept the focus on supply disruptions and the possible
hit to crude output from U.S. sanctions on Iran. U.S. crude oil
futures        settled 2.1 percent higher at $70.13 a barrel.
    Gains for the loonie came as the U.S. dollar        lost
ground against a basket of major currencies ahead of a policy
decision by the Bank of Japan on Tuesday that could mark a
change to its monetary easing policy.             
    At 3:30 p.m. (1930 GMT), the Canadian dollar          was
trading 0.2 percent higher at C$1.3025 to the greenback, or
76.78 U.S. cents.
    The currency, which rose 0.7 percent last week, touched its
strongest level since June 14 at C$1.2995.
    Adjustment of trading positions ahead of Canada's monthly
gross domestic product data, which is due on Tuesday, could have
added to support for the loonie.     
    "There have been some whispers that the GDP report could be
on the stronger side for May in Canada," Smith said.
    Still, Canada is finding it harder to attract the foreign
investment in its bonds and stocks that it needs to finance a
current account deficit.             
    Canada's trade data for June is due on Friday.    
    Canadian government bond prices were mixed across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 1 Canadian cent to yield 2.058 percent and the
10-year             fell 6 Canadian cents to yield 2.303
    The 10-year yield touched its highest since June 13 at 2.336

 (Reporting by Fergal Smith; Editing by Peter Cooney)
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