April 5, 2017 / 8:26 PM / 3 years ago

CANADA FX DEBT-C$ dips as oil prices ease off one-month highs

 (Adds dealer quotes, details on Fed minutes, Toronto home
sales; updates prices)
    * Canadian dollar at C$1.3427, or 74.78 U.S. cents
    * Bond prices higher across the yield curve

    By Fergal Smith
    TORONTO, April 5 (Reuters) - The Canadian dollar edged lower
on Wednesday against the greenback as oil prices eased off
one-month highs, while minutes from the Federal Reserve's latest
meeting supported the view that Canadian and U.S. monetary
policy will diverge.
    Most Fed policymakers think the U.S. central bank should
take steps to begin trimming its $4.5 trillion balance sheet
later this year as long as economic data holds up, the minutes
    Earlier in the day, data showing U.S. private-sector
employers created more jobs than expected in March supported
expectations of at least two more interest rate hikes from the
Fed this year.             
    "There is an expectation that interest rate differentials
are going to continue to diverge, which is putting the Canadian
dollar under pressure," said Scott Lampard, head of global
markets at HSBC Bank Canada.
    U.S. crude        prices settled 12 cents higher at $51.15 a
barrel, but had pared some gains as support from an outage at
the largest UK North Sea oilfield was offset by a surprise
increase in U.S. crude inventories to a record high.      
    Oil is one of Canada's major exports.
    The Canadian dollar          ended at C$1.3427 to the
greenback, or 74.78 U.S. cents, weaker than Tuesday's close of
C$1.3406, or 74.59 U.S. cents.
    The currency traded in a range of C$1.3379 to C$1.3435.
    On Tuesday, the loonie hit a nearly three-week low at
C$1.3455, pressured by a loss of risk appetite and domestic data
showing an unexpected trade deficit.
    Toronto home sales and prices surged in March, an industry
report showed, fueling fears of a real estate bubble in Canada's
largest city.             
    The risk of triggering "a problem in the Canadian housing
market" may cause the Bank of Canada to tread softly on interest
rate increases, Lampard said.
    The central bank's next rate decision and monetary policy
report are due on April 12.
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 2.5 Canadian cents to
yield 0.724 percent and the 10-year             rising 21
Canadian cents to yield 1.558 percent.
    On Tuesday, the 10-year yield touched its lowest in four
months at 1.545 percent.
    Canada's employment report for March is due on Friday.
Economists forecast that Canada added just 5,000 jobs after a
strong run of employment gains.         

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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