May 16, 2017 / 9:08 PM / 3 years ago

CANADA FX DEBT-C$ strengthens to nearly 3-week high as greenback falls

 (Adds analyst quote and updates prices)
    * Canadian dollar at C$1.3587, or 73.60 U.S. cents
    * Loonie touches its strongest since April 27 at C$1.3575
    * Bond prices higher across much of a flatter yield curve

    By Fergal Smith
    TORONTO, May 16 (Reuters) - The Canadian dollar strengthened
on Tuesday to a nearly three-week high against its U.S.
counterpart as the greenback lost ground against a basket of
major currencies, offsetting a pullback in oil prices.
    The weakening of the U.S. dollar        came as U.S.
officials said President Donald Trump discussed intelligence
about Islamic State with Russian Foreign Minister Sergei Lavrov
and Russian Ambassador Sergei Kislyak at talks last Wednesday in
the Oval Office.                         
    "His entire agenda is in danger at this point. Traders are
piling out of the U.S. dollar into commodity-linked currencies,
into the euro, into the yen," said Karl Schamotta, director
global markets strategy at Cambridge Global Payments.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading at C$1.3587 to the greenback, or 73.60 U.S. cents, up
0.3 percent, according to Reuters data.
    The currency's weakest level of the session was C$1.3659,
while it touched its strongest since April 27 at C$1.3575.
    U.S. Senator Charles Grassley said that he believes the
Trump administration will likely pursue a trilateral trade deal
with Canada and Mexico as it renegotiates the North American
Free Trade Agreement.             
    An uncertain trade outlook with the United States had helped
pressure the Canadian dollar to a 14-month low at C$1.3793
earlier this month.    
    U.S. crude oil futures        settled 19 cents lower at
$48.66 a barrel, paring some recent gains, as the market awaited
weekly U.S. inventory figures and as Kuwait and other OPEC
members joined top producers Saudi Arabia and Russia in support
of prolonging supply cuts through March 2018.
    Canadian government bond prices rose across much of a
flatter yield curve in sympathy with U.S. Treasuries after data
showed U.S. homebuilding activity unexpectedly weakened in
    The 10-year             rose 21 Canadian cents to yield
1.571 percent, while the gap between the 2-year and 10-year
yields narrowed 2.8 basis points to a spread of 87 basis points
as longer-dated maturities outperformed.
    Lending to small Canadian businesses was little changed in
March from the month before, though borrowing by medium-sized
companies jumped as they benefited from a recovery in the energy
sector, data showed.             

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Steve
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