July 31, 2018 / 8:14 PM / in 4 months

CANADA FX DEBT-C$ climbs to 7-week high as domestic economy strengthens

 (Adds analyst quotes and details on activity; updates prices)
    * Canadian dollar at C$1.3006, or 76.89 U.S. cents
    * Loonie touches its strongest intraday since June 14
    * Price of U.S. oil falls nearly 2 percent
    * Bond prices fall across a steeper yield curve

    By Fergal Smith
    TORONTO, July 31 (Reuters) - The Canadian dollar rose to a
nearly seven-week high against its U.S. counterpart on Tuesday
as investors weighed a possible easing of global trade tensions
and after data showed stronger-than-expected growth in the
domestic economy.
    Canada's economy grew by 0.5 percent in May, the biggest
rise in a year, as industries recovered from a combination of
bad weather and maintenance shutdowns in April, Statistics
Canada said.             
    "The growth was broad, all of the major sectors were growing
solidly," said Ranko Berich, head of market analysis at Monex
Canada and Monex Europe, who thinks that markets are
underestimating prospects of another Bank of Canada interest
rate hike as soon as September.
    The central bank raised its benchmark interest rate earlier
this month by 25 basis points to 1.50 percent. Chances of
another hike in September climbed to one in four from less than
20 percent before the economic data, the overnight index swaps
market indicated.           
    News of a possible easing of tariff tensions between the
United States and China helped boost stocks on Wall Street.
            
    Canada runs a current account deficit, so its economy could
be hurt if the flow of trade or capital slows.             
    At 3:57 p.m. EDT (1957 GMT), the Canadian dollar         
was trading 0.2 percent higher at C$1.3006 to the greenback, or
76.89 U.S. cents.
    The currency's weakest level of the session was C$1.3097,
while it touched its strongest since June 14 at C$1.2980.
    For the month, the loonie was on track to rise 1 percent.
    The price of oil, one of Canada's major exports, fell after
a survey showed OPEC's output hit a 2018 high in July. U.S.
crude oil futures        settled nearly 2 percent lower at
$68.76 a barrel.                 
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year            down 5 Canadian cents
to yield 2.076 percent and the 10-year             falling 34
Canadian cents to yield 2.339 percent.
    The 10-year yield touched its highest intraday since May 25
at 2.347 percent, while the gap between it and its U.S.
equivalent narrowed by 4.9 basis points to a spread of 62.7
basis points in favor of the U.S. bond.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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