February 7, 2017 / 10:04 PM / 7 months ago

CANADA FX DEBT-C$ at weakest in 2 weeks as oil slides, trade data mixed

 (Adds strategist comment, updates prices to close)
    * Canadian dollar at C$1.3167, or 75.95 U.S. cents
    * Bond prices mixed across the maturity curve

    By Alastair Sharp
    TORONTO, Feb 7 (Reuters) - The Canadian dollar hit its
weakest close in more than two weeks against a broadly higher
U.S. counterpart on Tuesday, with falling oil prices and concern
about some details of a trade surplus report weighing.
    The currency also suffered as investors reassessed the
prospect of a faster pace to U.S. interest rate hikes after
Philadelphia Federal Reserve Bank President Patrick Harker said
late on Monday he would be open to raising rates at the central
bank's March meeting if growth in jobs and wages continues.
    "Even though he is a known hawk, the fact that he came out
and communicated his preference for the three-hike path and
maintain that March was a live meeting was enough to wake people
up," said Eric Theoret, a currency strategist at Scotiabank.
    Prices for oil              , a major Canadian export, fell
more than 1 percent as growing evidence of a revival in U.S.
shale production offset lower output by OPEC and other
exporters.       
    The Canadian dollar          settled at C$1.3167 to the
greenback, or 75.95 U.S. cents, much weaker than the Bank of
Canada's close on Monday of C$1.3087, or 76.41 U.S. cents and
its weakest settlement since Jan. 23.
    The currency traded as strong as C$1.3076 early in the
session before weakening to as much as C$1.3213.
    Canada posted a C$923 million trade surplus in December,
thanks largely to booming crude oil exports, Statistics Canada
said. November's surplus was also revised sharply higher.
            
    But while overall exports rose by 0.8 percent in December,
export volumes actually fell by 1.4 percent.
    "On the headline it looks great, when you dig into the
details, whether it's the breadth of the export growth or the
composition of price versus volume, it doesn't provide as much
confidence," Scotia's Theoret said.
    The loonie has made strong gains so far this year, but that
upsurge will likely peter out over the coming months as an
expected widening gap between steady interest rates in Canada
and rising U.S. rates eclipses higher oil prices, a Reuters poll
found.             
    Canadian government bond prices were mixed across the
maturity curve, with the two-year            price down half a
Canadian cent to yield 0.740 percent and the benchmark 10-year
            up 9 Canadian cents to yield 1.690 percent.

 (Reporting by Alastair Sharp; Editing by Meredith Mazzilli and
James Dalgleish)
  
 

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