June 23, 2020 / 7:43 PM / 14 days ago

CANADA FX DEBT- Loonie lags G10 peers on potential setback for U.S.-Canada trade relations

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.2% against the greenback
    * Loonie touches its strongest level since June 11 at 1.3486
    * Price of U.S. oil decreases 0.9%
    * Canadian bond yields trade mixed across a flatter curve

    By Fergal Smith
    TORONTO, June 23 (Reuters) - The Canadian dollar was the
only G10 currency to lose ground against its U.S. counterpart on
Tuesday as investors worried that Washington could reimpose
tariffs on Canadian aluminum, with the loonie pulling back from
a near two-week high.
    The loonie        was trading 0.2% lower at 1.3543 to the
greenback, or 73.84 U.S. cents. The currency touched its
strongest intraday level since June 11 at 1.3486 before turning
    Canada denied its aluminum exports harm the U.S. market and
is underlining that point to its American partners, a Canadian
official said after a report that the United States planned to
reimpose tariffs it removed last year.             
    "Canadian dollar traders had thought the trade war was
behind them," said Adam Button, chief currency analyst at
    If tariffs are reimposed, it would be "a step backwards in
Canadian-U.S. trade," Button said. Canada sends about 75% of its
exports to the United States, including oil.
    The U.S. dollar        lost ground against a basket of major
currencies after euro zone Purchasing Managers' Indexes thumped
expectations, boosting the euro.              
    The potential for spikes in coronavirus infection rates
across the United States to slow the country's economic recovery
could weigh on the greenback in coming months but the loonie is
unlikely to benefit, said Button.
    "In the broader picture, the U.S. will drag down Canada with
it," Button said.
    The decline for the loonie came as oil prices pulled back
from an earlier 3-1/2-month high. U.S. crude oil futures       
settled 0.9% lower at $40.37 a barrel.                 
    Canadian government bond yields were mixed across a flatter
curve, with the 2-year            up 1.7 basis points at 0.317%.

 (Reporting by Fergal Smith; Editing by Andrea Ricci and Peter
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