July 16, 2019 / 8:27 PM / a month ago

CANADA FX DEBT-C$ weakens against the greenback as oil prices fall

 (Adds strategist quote and details on activity; updates prices)
    * Canadian dollar down by 0.2% against the greenback
    * U.S. oil futures fall by 3.3%
    * Canadian bond prices trade mixed across the yield curve

    By Levent Uslu
    July 16 (Reuters) - The Canadian dollar weakened on Tuesday,
after nearing a nine-month high earlier in the day, as oil
prices dropped in response to easing tensions between the United
States and Iran.
    The price of oil, one of Canada's major exports, fell as
U.S. President Donald Trump said progress has been made with
Iran. U.S. crude oil futures        settled 3.3% lower at $56.72
a barrel.             
    "There has been a surprise in U.S.-Iran relations,
evidently, that sent oil 3% lower and moved down the Canadian
dollar with it," said Adam Button, chief currency analyst at
Forexlive.    
    The loonie has gained sharply against the greenback in
recent days as the Bank of Canada showed no signs it was
prepared to lower interest rates anytime soon.             
    Canadian policy-makers' current stance come as soft
inflation data and global trade disputes have led other central
banks including the Federal Reserve to signal they are ready to
provide stimulus to counter an economic slowdown.
    "The currency has been on a tear the last few weeks. We are
taking a breather," said Mazen Issa, senior FX strategist at TD
Securities in New York.
    At 4:03 p.m. (2003 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3075 to the greenback, or 76.48 U.S.
cents. The currency, which last Friday touched a near nine-month
high at 1.3018, traded in a range of 1.3023 to 1.3081.    
    The U.S. dollar        rose against a basket of currencies
as surprisingly strong growth in U.S. retail sales in June
soothed worries about the American economy and trimmed
expectations the Federal Reserve may embark on a deep interest
rate cut later this month.    
    Investors still expect the Fed to lower for the first time
in a decade in two weeks, albeit by a more modest quarter-point
decrease. 
    Analysts expect the Bank of Canada may not be able to stay
pat on rates for long if the Fed and other major central banks
begin cutting rates and/or buying bonds.
    "The Bank of Canada can really afford to be patient, but the
BoC is going to be pressured to cut rates like the other central
banks," said Alfonso Esparza, senior market analyst at Oanda in
Toronto.
    Canadian government bond prices were mixed across the yield
curve, with the two-year            up 0.5 Canadian cent to
yield 1.564% and the 10-year             down 1 Canadian cent to
yield 1.593%.

    
 (Reporting by Levent Uslu; additional reporting by Richard
Leong; Editing by Susan Thomas)
  
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