January 8, 2019 / 2:28 PM / 8 months ago

CANADA FX DEBT-C$ reverses from earlier 1-month high as exports slide

    * Canadian dollar trades near flat against the greenback
    * Loonie touches its strongest intraday since Dec. 7
    * Price of U.S. oil rises 1.7 percent
    * Bond prices trade mixed across the yield curve
    * Canada-U.S. 2-year spread widens by 3.6 basis points

    TORONTO, Jan 8 (Reuters) - The Canadian dollar was little
changed against its broadly stronger U.S. counterpart on
Tuesday, pulling back from an earlier one-month high as domestic
data showing a wider trade deficit offset further recovery in
oil prices.
    Canada's trade deficit widened in November to C$2.06
billion, pressured by a 2.9 percent drop in exports as crude oil
exports declined, Statistics Canada said. Analysts had forecast
a deficit of C$1.95 billion.                 
     The price of oil has rallied in recent days after falling
sharply since October. U.S. crude oil futures        were up 1.7
percent at $49.33 a barrel on hopes that talks in Beijing
between U.S. and Chinese officials might defuse a trade dispute
between the world's two biggest economies.             
    Stocks were also boosted by expectations of a trade deal,
while the U.S. dollar        climbed against a basket of major
currencies as signs of slowing in the euro zone economy weighed
on the euro.                         
    At 8:57 a.m. (1357 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3297 to the greenback, or 75.20
U.S. cents. The currency touched its strongest level since Dec.
7 at 1.3268.
    Its steadiness comes ahead of a Bank of Canada interest rate
decision on Wednesday. Money markets expect the central bank,
which has worried about the impact of lower oil prices on the
economy, to leave its benchmark interest rate on hold at 1.75
percent throughout 2019.           
    The leaders of Canada and the United States discussed U.S.
tariffs on Canadian steel and aluminum on Monday but no talks on
lifting the sanctions are planned, a Canadian source familiar
with the matter said.             
    Canadian government bond prices were mixed across the yield
curve, with the two-year            down 0.5 Canadian cent to
yield 1.889 percent and the 10-year             rising 4
Canadian cents to yield 1.952 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent widened by 3.6 basis points to a spread of 67.4 basis
points in favor of the U.S. bond.    

 (Reporting by Fergal Smith
Editing by Susan Thomas)
  
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