January 28, 2019 / 9:13 PM / 10 months ago

CANADA FX DEBT-C$ reverses from 2-week high on global growth worries

 (Adds investor quotes and details on activity; updates prices)
    * Canadian dollar falls 0.2 percent against the greenback
    * Price of U.S. oil falls 3.2 percent
    * Bond prices trade higher across a flatter yield curve

    By Fergal Smith
    TORONTO, Jan 28 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday, pulling back from its
highest level in more than two weeks as oil prices fell and
investors worried about the impact on the global economy of a
slowdown in China.
    U.S. stocks tumbled as warnings from Caterpillar Inc        
and Nvidia Corp          added to concerns about a slowing
Chinese economy and tariffs taking a bite out of U.S. corporate
profits.             
    Officials from China are due to visit Washington this week
for the next round of trade negotiations with the United States.
The trade dispute between the world's two largest economies
could worsen the outlook for global growth.               
    Canada is running a current account deficit and exports many
commodities, including oil, so its economy could be hurt by a
slowdown in the global flow of trade or capital.
    "I see no real argument on how we can buck the trend of a
global economic slowdown and in many ways Canada may feel that
slowdown harder and longer than most developed economies." said
Michael White, a portfolio manager at Picton Mahoney Asset
Management in Toronto.
    U.S. crude oil futures        settled 3.2 percent lower at
$51.99 a barrel after an increase in U.S. crude drilling pointed
to further supply growth. Still, oil has rebounded about 23
percent since hitting an 18-month low in December.             
    At 3:43 p.m. (2043 GMT), the Canadian dollar          was
trading 0.2 percent lower at 1.3252 to the greenback, or 75.46
U.S. cents, reducing some of Friday's sharp gains.
    Earlier in the session, the currency touched its strongest
since Jan. 11 at 1.3204.
    The 17-day high for the loonie came despite weak domestic
data last week that prompted some economists to project that
Canada's economy contracted in November. November gross domestic
product data is due on Thursday.
    The Bank of Canada cut its near-term growth forecasts
earlier this month as it left its benchmark interest rate on
hold at 1.75 percent.             
    "Given our lag on the U.S. in interest rates we would
suggest that the Canadian dollar is vulnerable down to 70 (U.S.)
cents," White said.
    The Federal Reserve's key overnight lending rate was raised
in December to a range of 2.25 percent to 2.50 percent. The
central bank is due to make an interest rate decision on
Wednesday.             
    Canadian government bond prices were higher across a flatter
yield curve, with 10-year             rising 12 Canadian cents
to yield 1.963 percent.

 (Reporting by Fergal Smith
Editing by Frances Kerry and Sandra Maler)
  
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