August 9, 2017 / 9:08 PM / 2 months ago

CANADA FX DEBT-C$ hits near 4-week low as investors weigh N. Korea tensions

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar at C$1.2705, or 78.71 U.S. cents
    * Loonie touches its weakest since July 14 at C$1.2721
    * Bond prices higher across a flatter yield curve

    By Fergal Smith
    TORONTO, Aug 9 (Reuters) - The Canadian dollar hit a nearly
four-week low against its U.S.  counterpart on Wednesday as
worries about increased U.S.-North Korea tension weighed,
offsetting higher oil prices and stronger-than-expected domestic
housing data.
    President Donald Trump's warning that North Korea faced
"fire and fury," and Pyongyang's threat of possible retaliation,
drove investors out of stocks and into the yen, Swiss franc,
gold and government debt.             
    Commodity-linked currencies, such as the Canadian dollar,
which are sensitive to global trade, also lost ground.
    The loss of risk appetite has spurred some "squaring up" of
investors' positions after a recent big move in the loonie, said
Scott Lampard, head of global markets at HSBC Bank Canada.
    Speculators have increased bullish bets on the loonie to the
highest level since January 2013, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed on
Friday.             
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading at C$1.2705 to the greenback, or 78.71 U.S. cents, down
0.3 percent.
    The currency's strongest level of the session was C$1.2666,
while it touched its weakest since July 14 at C$1.2721.
    Still, the loonie has rallied 6 percent since the Bank of
Canada turned hawkish in June. The central bank raised interest
rates last month for the first time in nearly seven years.
    "The big picture question continues to be what is the Bank
of Canada going to do in the fall," Lampard said.
    Economists expect the central bank to hike again as soon as
October. But recent widening in the trade deficit and a slowdown
in the housing market could temper the pace of rate hikes. 
    Canadian housing starts rose in July on growth in western
British Columbia, even as groundbreaking on single-detached
homes fell in Toronto where activity has cooled after the
province introduced measures to rein in a frothy market.
            
     U.S. crude        prices settled 39 cents higher at $49.56
a barrel after data pointed to declining U.S. inventories.
            
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries as investors bought
safe-haven assets.
    The 10-year             rose 24 Canadian cents to yield
1.907 percent, while the gap between the 2-year yield and the
10-year yield narrowed by 1 basis point to 66.8 basis points, as
longer-dated bonds outperformed.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Lisa
Shumaker)
  
 

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