August 16, 2017 / 8:57 PM / a year ago

CANADA FX DEBT-C$ rallies 1 pct as Fed minutes, Trump pressure greenback

    * Canadian dollar at C$1.2627, or 79.20 U.S. cents
    * Bond prices higher across the yield curve

    By Solarina Ho
    TORONTO, Aug 16 (Reuters) - The Canadian dollar rebounded
against its U.S. counterpart on Wednesday from a one-month low
hit the day before, driven by a broad-based retreat in the U.S.
dollar on the back of Federal Reserve concerns over inflation.
    Investors were also following North American Free Trade
Agreement renegotiation talks, which kicked off on Wednesday,
but an overall dearth of domestic news meant the loonie took its
cues elsewhere.
    Minutes from the U.S. central bank's July meeting showed
policy makers were increasingly worried about a recent streak of
soft inflation readings, raising the possibility the Fed could
hold off raising interest rates.             
    "The outlook for interest rate hikes, while still pretty
much on course, is causing a little bit of uncertainty to creep
into the market," said Rahim Madhavji, President at
KnightsbridgeFX.com.
    "I think the U.S. dollar rally popped a while ago. We're
going to see the USD/CAD oscillate around where we are."
    At 4:00 p.m. ET (2000 GMT), the Canadian dollar          was
trading at C$1.2627 to the greenback, or 79.20 U.S. cents, up 1
percent.
    The currency traded in a range of C$1.2614 to C$1.2770.
    On Tuesday, the loonie hit its lowest level since July 12 at
C$1.2778, pressured by broader gains for the greenback as North
Korea tensions eased and data showed a jump in U.S. retail
sales.
    The U.S. dollar fell to session lows against a number of
currencies, extending earlier losses after the disbanding of    
U.S. President Donald Trump's manufacturing council and
strategic policy forum.
    "There's a little bit of uncertainty with Trump: his ability
to implement his agenda, the noise around it, how that may or
may not impact the Fed," said Madhavji.
    The loonie's rally came even as prices of oil, one of
Canada's major exports, slumped more than 1.5 percent following
data that suggested U.S. production was edging higher, stoking
renewed worries about a global crude glut.             
    Foreign investors sold a net C$923 million ($724.83 million)
in Canadian securities in June after buying C$29.44 billion in
securities in May, Statistics Canada said. It was the first
monthly divestment since July 2015.             
    Canadian government bond prices were higher across the yield
curve, with the two-year            price up 2 Canadian cents to
yield 1.233 percent and the benchmark 10-year             rising
31.5 Canadian cents to yield 1.871 percent.
    Canada's closely watched inflation data for July is due on
Friday.         

 (Reporting by Fergal Smith; Editing by W Simon and Diane Craft)
  
 
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