Canadian dollar weakens as NAFTA trade deal doubts emerge

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as doubts emerged that a deal to revamp the NAFTA trade pact would be reached by the end of the day.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto, Ontario, Canada, January 23, 2015. REUTERS/Mark Blinch/File Photo

Canada and the United States will make a final push to iron out differences on a pact to modernize the North American Free Trade Agreement (NAFTA) by a Friday deadline set by President Donald Trump, but the atmosphere soured late on Thursday according to a media report.

Canadian officials expressed concern that a final NAFTA deal would not be concluded on Friday, the Globe and Mail reported, citing a source familiar with situation.

Canada sends about 75 percent of its exports to the United States, so its economy could be hurt if a deal is not reached.

On Thursday, data showed that the Canadian economy expanded in the second quarter at the fastest pace in one year as exports climbed, but the improved growth was not expected to trigger an interest hike next week from the Bank of Canada.

Canadian producer prices declined by 0.2 percent in July from June on lower prices for primary non-ferrous metal products, Statistics Canada said on Friday.

At 9:10 a.m. (1310 GMT), the Canadian dollar CAD=D4 was trading 0.6 percent lower at C$1.3062 to the greenback, or 76.56 U.S. cents. The currency's strongest level of the session was C$1.2978, while it touched its weakest since Monday at C$1.3064.

The decline for the loonie came as stocks were pressured by U.S. President Donald Trump’s latest salvo in Washington’s trade war with China.

Canada runs a current account deficit and exports many commodities so its economy could also be hurt if the global flow of trade or capital slows.

The price of oil, one of Canada's major exports, fell as concerns over the impact of a trade war depressed sentiment. U.S. crude CLc1 prices were down 0.50 percent at $69.90 a barrel.

Canadian government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 6.5 Canadian cents to yield 2.07 percent and the 10-year CA10YT=RR rising 42 Canadian cents to yield 2.224 percent.

The 10-year yield hit its lowest intraday since July 25 at 2.219 percent.

Reporting by Fergal Smith; Editing by David Gregorio