May 24, 2018 / 8:43 PM / 2 years ago

CANADA FX DEBT-C$ hits 9-day low as oil prices fall, U.S. mulls auto tariffs

 (Adds strategist quotes and details on activity; updates
    * Canadian dollar at C$1.2892, or 77.57 U.S. cents
    * Loonie touches its weakest since May 15 at C$1.2921
    * The price of oil falls 1.6 percent
    * Bond prices higher across the yield curve

    By Fergal Smith
    TORONTO, May 24 (Reuters) - The Canadian dollar weakened to
a more than one-week low against its U.S. counterpart on
Thursday, pressured by lower oil prices and the potential
imposition of U.S. tariffs on auto imports.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.4 percent lower at C$1.2892 to the greenback, or 77.57
U.S. cents. The currency touched its weakest since May 15 at
    "Today's theme is auto sector tariffs," said Greg Anderson,
global head of foreign exchange strategy in New York. "Where all
of the other G10 currencies appreciated against the (U.S.)
dollar today, CAD lost ground."
    The Trump administration has launched a national security
investigation into car and truck imports that could lead to new
U.S. tariffs, similar to those imposed on imported steel and
aluminum in March.             
    The move to explore auto tariffs is based on flimsy logic
and is part of the pressure from Washington to renegotiate the
North American Free Trade Agreement, Canadian Prime Minister
Justin Trudeau told Reuters in an interview.             
    Canada is a major exporter of autos to the United States so
its economy could be hurt by U.S. auto tariffs or failure to
reach a deal on NAFTA.
    Oil is also one of Canada's major exports. Its price fell as
expectations rose that reduced supplies from Venezuela and Iran
could prompt OPEC to wind down output cuts in place since the
start of 2017.             
    U.S. crude oil futures        settled 1.6 percent lower at
$70.71 a barrel.
    Still, oil has climbed by more than 20 percent since
February. Its recent strength has helped offset the gap between
U.S. and Canadian interest rates, Anderson said.
    The Bank of Canada will probably hold interest rates steady
on May 30 as uncertain trade policy and indebted consumers
necessitate caution, but firmer price and wage inflation will
prompt two increases in the second half of 2018, a Reuters poll
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries after U.S. President
Donald Trump called off a planned summit with North Korean
leader Kim Jong Un, boosting demand for safe-haven assets.
    The Canadian two-year            rose 6 Canadian cents to
yield 1.994 percent and the 10-year             climbed 32
Canadian cents to yield 2.407 percent.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Sandra Maler)
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