August 14, 2017 / 1:47 PM / 4 months ago

CANADA FX DEBT-C$ dips with oil prices; NAFTA renegotiations loom

    * Canadian dollar at C$1.2704, or 78.72 U.S. cents
    * Bond prices lower across a steeper yield curve

    TORONTO, Aug 14 (Reuters) - The Canadian dollar weakened on
Monday against its U.S. counterpart as oil prices fell and the
greenback posted broader gains, while investors awaited the
start of renegotiations of the NAFTA trade pact this week.
    Prices of oil, one of Canada's major exports, fell as a
slowdown in Chinese refining raised concerns about demand for
crude in the Asian country.             
    The U.S. dollar        edged higher against a trade-weighted
basket of currencies after posting its biggest weekly drop in
three weeks as expectations of U.S. interest rate increases
dwindled further after weak inflation data.             
    U.S. crude        prices were down 0.45 percent at $48.60 a
barrel.
    The Canadian government's goals for talks on modernizing the
North American Free Trade Agreement include preserving the
pact's dispute-settlement mechanism, Foreign Minister Chrystia
Freeland said, setting up a potential clash with the United
States.             
    At 9:16 a.m. ET (1316 GMT), the Canadian dollar          was
trading at C$1.2704 to the greenback, or 78.72 U.S. cents, down
0.2 percent.
    The currency traded in a range of C$1.2675 to C$1.2716. On
Friday, the loonie touched its weakest in four weeks at
C$1.2753.
    Still, speculators have increased bullish bets on the loonie
to the highest level since January 2013, according to data from
the U.S. Commodity Futures Trading Commission and Reuters
calculations on Friday. Canadian dollar net long positions rose
to 62,821 contracts as of Aug. 8 from 40,638 contracts a week
earlier.             
    Tension on the Korean peninsula eased slightly and
risk-sensitive assets, such as stocks, rallied as U.S. officials
played down the risk of an imminent war.                 
    As a major commodity producer, Canada could be hurt if
geopolitics hamper global trade.    
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries, as investor demand
weakened for low-risk government debt. The two-year           
fell 3.5 Canadian cents to yield 1.229 percent and the 10-year
            declined 35 Canadian cents to yield 1.893 percent.
            
    Canada's inflation report for July is due on Friday.    

 (Reporting by Fergal Smith; Editing by W Simon)
  
 

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