August 16, 2018 / 8:49 PM / 3 months ago

CANADA FX DEBT-C$ dips ahead of CPI report as Keystone XL suffers setback

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    * Canadian dollar at C$1.3161, or 75.98 U.S. cents
    * Canadian factory sales rise 1.1 percent in June
    * Bond prices higher across flatter yield curve
    * 10-year yield touches a 3-week low at 2.246 percent

    By Fergal Smith
    TORONTO, Aug 16 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Thursday as a planned oil
pipeline from Alberta to Nebraska met with a setback, but the
currency held within its recent range ahead of the country's
inflation report due on Friday.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.2 percent lower at C$1.3161 to the greenback, or 75.98
U.S. cents. The currency, which on Monday neared a three-week
low of C$1.3179, traded in a range of C$1.3114 to C$1.3175.
    "We are really just treading water ahead of tomorrow's
inflation data," said Brad Schruder, director of corporate sales
and structuring at BMO Capital Markets. "Experienced global
investors have little interest in taking positions ahead of a
major piece of data such as CPI."
    The inflation data could help guide expectations for further
Bank of Canada interest rate increases this year. Money markets
expect the central bank to hike its benchmark interest rate,
which sits at 1.50 percent, once more by December.           
    A federal judge in Montana on Wednesday ordered the U.S.
State Department to do a full environmental review of a revised
route for a phase of the Keystone XL crude oil pipeline, which,
when completed, would carry heavy crude to Steele City in
Nebraska from Canada's oil sands in Alberta.             
    The pipeline could help reduce transport bottlenecks for
Canadian oil, which trades at a discount to the price of U.S.
crude.
    Canadian factory sales grew by 1.1 percent in June from May,
thanks largely to a rebound in petroleum and coal products after
temporary shutdowns in the spring, Statistics Canada said.
            
    U.S. Trade Representative Robert Lighthizer expressed hope a
breakthrough could be made in the coming days in efforts to
rework the North American Free Trade Agreement, which includes
Canada and Mexico. His Mexican counterpart said flexibility was
needed to reach a deal.             
    The U.S. dollar weakened against a basket of other major
currencies as news that a Chinese delegation will travel to the
United States for trade talks prompted investors to buy back
into currencies hit hard in a sell-off in recent days.
                
    U.S. crude oil futures        settled 0.7 percent higher at
$65.46 a barrel. Oil is one of Canada's major exports. 
    Canadian government bond prices were higher across a flatter
yield curve, with the 10-year             rising 12 Canadian
cents to yield 2.255 percent. The 10-year yield touched 2.246
percent, its lowest intraday since July 25.

 (Reporting by Fergal Smith;
Editing by Steve Orlofsky and Phil Berlowitz)
  
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