February 25, 2019 / 9:39 PM / 8 months ago

CANADA FX DEBT-C$ pulls back from near 3-week high as oil prices slide

 (Adds dealer quote and details throughout; updates prices)
    * Loonie weakens 0.4 percent against greenback after earlier
rise
    * Currency touches its strongest intraday since Feb. 5 at
1.3113
    * Price of U.S. oil falls 3.1 percent
    * Canadian bond prices dip across much of the yield curve

    By Fergal Smith
    TORONTO, Feb 25 (Reuters) - The Canadian dollar edged lower
against the greenback on Monday, reversing from its highest
level in nearly three weeks earlier in the session as oil prices
tumbled and investors braced for domestic inflation data due
later in the week.
    The price of oil, one of Canada's major exports, sank after
U.S. President Donald Trump said OPEC should ease its approach
on boosting crude prices, which he said were "getting too high."
    U.S. crude oil futures        settled 3.1 percent lower at
$55.48 a barrel.
    The decline in oil prices and "traders wanting to square up
positions" ahead of inflation data triggered the loonie's
pullback, said Darren Richardson, Chief Operating Officer at
Richardson International Currency Exchange Inc.
    Canada's inflation report for January is due on Wednesday
and fourth-quarter domestic product data is due on Friday, which
could help guide expectations for further interest rate hikes
from the Bank of Canada.
    Money markets expect the Bank of Canada to leave its
benchmark interest rate unchanged at 1.75 percent at next week's
interest rate decision, after 125 basis points of tightening by
the central bank since July 2017.
    At 4:21 p.m. (2121 GMT), the Canadian dollar          was
trading 0.4 percent lower at 1.3189 to the greenback, or 75.82
U.S. cents. The currency's weakest level of the session was
1.3196, while it touched its strongest since Feb. 5 at 1.3113.
    U.S. stocks rose when Trump said he would delay a planned
hike in tariffs on Chinese imports and that the two countries
were "very, very close" to a trade deal.             
    Canada exports many commodities, including oil, so its
economy could benefit from an improved outlook for global trade.
    Data on Friday from the U.S. Commodity Futures Trading
Commission and Reuters calculations showed that speculators cut
their bearish bets on the Canadian dollar. As of Feb. 5, net
short positions had fallen to 42,037 contracts from 56,390 in
the prior week.             
    Canadian government bond prices edged lower on Monday across
much of the yield curve in sympathy with U.S. Treasuries. The
two-year            fell 1 Canadian cent to yield 1.783 percent
and the 10-year             declined 5 Canadian cents to yield
1.897 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent widened by 1.7 basis points to a spread of 72.9 basis
points in favor of the U.S. bond.

 (Reporting by Fergal Smith; Editing by Andrea Ricci and Grant
McCool)
  
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