TORONTO (Reuters) - The Canadian dollar was little changed against its broadly stronger U.S. counterpart on Monday, pulling back from an earlier three-month high which was reached after the United States and Mexico announced a deal on immigration.
U.S. President Donald Trump hinted more details were to come about a migration pact the United States signed with Mexico last week, saying another portion of the deal with Mexico would need to be ratified by Mexican lawmakers.
Investors worry that potential U.S. tariffs on Mexican goods could undermine chances of a new North American trade deal coming into force. Canada sends about 75% of its exports, including oil, to the United States.
At 9:17 a.m. (1317 GMT), the Canadian dollar was trading nearly unchanged at 1.3266 to the greenback, or 75.38 U.S. cents. The currency, which climbed 1.9% last week, touched its strongest level since March 1 at 1.3226.
The three-month high for the loonie came after data on Friday showed a record low unemployment rate, which supported the Bank of Canada’s view that the economy will pick up.
Canadian housing starts fell 13.3% in May compared with the previous month as groundbreaking tumbled on multiple unit urban homes, data from the national housing agency showed on Monday.
U.S. crude oil futures were nearly unchanged at $54.01 a barrel as major producers weighed extending an output-cutting deal. Oil is one of Canada’s major exports.
Meanwhile, the U.S. dollar rose against a basket of major currencies after sources said European Central Bank policymakers were open to cutting the ECB’s policy rate should economic growth worsen, pressuring the euro.
Speculators have raised their bearish bets on the Canadian dollar for the first time in three weeks, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of June 4, net short positions had increased to 41,759 contracts from 39,423 in the prior week.
Canadian government bond prices were lower across the yield curve, with the two-year down 9 Canadian cents to yield 1.453% and the 10-year falling 45 Canadian cents to yield 1.508%.
The gap between Canada’s 2-year yield and its U.S. equivalent narrowed by 1.8 basis points to a spread of 42.6 basis points in favor of the U.S. bond, its narrowest gap since March 2018.
Reporting by Fergal Smith; Editing by Susan Thomas
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