December 3, 2018 / 3:05 PM / a year ago

CANADA FX DEBT-C$ rallies to 2-week high on U.S.-China trade truce

    * Canadian dollar rises 0.8 percent; largest gain since
    * Loonie touches its strongest level since Nov. 20 at 1.3160
    * The price of U.S. oil jumps 4.2 percent
    * Canadian bond prices fall across a flatter yield curve

    TORONTO, Dec 3 (Reuters) - The Canadian dollar strengthened
to its highest in nearly two weeks against its U.S. counterpart
on Monday, after Washington and Beijing's agreement for a
ceasefire in their trade war boosted oil prices and stocks.
    Stocks and the price of oil, one of Canada's major exports,
climbed after the United States and China agreed to a 90-day
truce in a trade dispute, and ahead of a meeting this week of
the Organization of the Petroleum Exporting Countries that is
expected to cut supply.             
    U.S. crude        prices were up 4.2 percent at $53.05 a
    The lower price of oil since October has weighed on the
outlook for Canada's economy, with the potential impact worsened
by a historically big discount for Canadian heavy crude.
    Alberta Premier Rachel Notley said on Sunday that the
Western Canadian province would mandate temporary oil production
cuts to deal with a pipeline bottleneck that has led to a glut
of crude in storage and driven down Canadian crude prices.
    At 9:51 a.m. (1451 GMT), the Canadian dollar          was
trading 0.8 percent higher at 1.3173 to the greenback, or 75.91
U.S. cents, its biggest gain since Sept. 28. The currency
touched its strongest level since Nov. 20 at 1.3160.        
    Gains for the loonie came ahead of a Bank of Canada policy
decision on Wednesday. Data on Friday showing Canada's economic
growth slowed in the third quarter has underpinned market
expectations that the central bank will not hike interest rates
this week.                 
    The Bank of Canada will next raise interest rates early next
year, according to a strong majority of economists polled by
Reuters who still say two more rate rises will follow by
     Canada's manufacturing sector expanded in November at the
fastest pace in three months, boosted by a pickup in new orders
and the strongest job creation in at least eight years, data
showed on Monday.             
    Canada's trade report for October is due on Thursday and the
November employment report is due on Friday.    
    U.S. President Donald Trump said on Saturday he will give
formal notice to the U.S. Congress in the near future to
terminate the North American Free Trade Agreement (NAFTA),
giving six months for lawmakers to approve a new trade deal
signed on Friday.             
    Canadian government bond prices were lower across a flatter
yield curve in sympathy with U.S. Treasuries. The 10-year
            fell 12 Canadian cents to yield 2.283 percent.

 (Reporting by Fergal Smith)
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