August 20, 2018 / 8:11 PM / 4 months ago

CANADA FX DEBT-C$ posts 10-day high as Trump comments pressure greenback

 (New throughout)
    * Canadian dollar at C$1.3050, or 76.63 U.S. cents 
    * U.S. oil prices rise 0.8 percent
    * Canadian government bond prices rise across flatter yield
curve
    * Canada-U.S. 2-year spread hits narrowest in nearly three
months

    By Fergal Smith
    OTTAWA, Aug 20 (Reuters) - The Canadian dollar rose to a
10-day high against its U.S. counterpart on Monday, as oil
prices climbed and U.S. President Donald Trump said he disagreed
with the U.S. Federal Reserve's decision to raise interest
rates.
    The U.S. dollar        fell against a basket of major
currencies as Trump showed his displeasure with Fed tightening.
            
    "I think it is mostly a (U.S.) dollar move today," said Erik
Nelson, a currency strategist at Wells Fargo. "I suspect what is
probably contributing to that is some of these comments from
Trump around his lament for the higher interest rates from the
Fed."
    The price of oil, one of Canada's major exports, rose as
investors grew more concerned about an expected fall in supply
from Iran because of U.S. sanctions and worried less that a
trade war between the United States and China would hurt
economic growth.             
    U.S. crude oil futures        settled 0.8 percent higher at
$66.43 a barrel.
    Investors will be closely watching this week's trade talks
between the United States and China for clues to whether the two
countries can resolve an escalating tariff war that threatens to
engulf all trade between the world's two largest economies.
            
    Canada exports many commodities and runs a current account
deficit, so its economy could be hurt if the flow of trade or
capital slows.
    At 3:28 p.m. (1928 GMT), the Canadian dollar          was
trading 0.1 percent higher at C$1.3050 to the greenback, or
76.63 U.S. cents. The currency touched its strongest level since
Aug. 10 at C$1.3046.            
    It was boosted on Friday by data showing that Canada's
annual inflation rate surged to 3.0 percent in July, its highest
level in nearly seven years. The acceleration in inflation
raised expectations that the Bank of Canada might raise interest
rates again as soon as next month.             
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 1.5 Canadian cents to yield 2.103 percent and
the 10-year             climbed 12 Canadian cents to yield 2.254
percent.
    The gap between the two-year yield and its U.S. equivalent
narrowed by 2.1 basis points to a spread of 48.8 basis points in
favor of the U.S. bond, its narrowest since May 30. 

 (Reporting by Fergal Smith; Additional reporting by Saqib Iqbal
Ahmed; Editing by Jonathan Oatis and Peter Cooney)
  
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