January 21, 2020 / 8:55 PM / 6 months ago

CANADA FX DEBT-Loonie weakens along with oil prices, ahead of BoC rate decision

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.1% against the greenback
    * Canadian factory sales decline 0.6% in November
    * Price of U.S. oil drops 0.3%
    * Canada's 10-year yield hits a near seven-week low

    By Fergal Smith
    TORONTO, Jan 21 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday as oil prices fell and domestic
data showed factory sales dropping for the third straight month,
with the decline for the loonie coming one day before a Bank of
Canada interest rate decision.
    At 2:57 p.m. (1957 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3072 to the greenback, or 76.50 U.S.
cents. The currency traded in a range of 1.3045 to 1.3077.
    "It's purely because oil markets are on the back foot," said
Simon Harvey, FX market analyst for Monex Europe and Monex
Canada.
    U.S. crude oil futures        settled 0.3% lower at $58.34 a
barrel on expectations that a well-supplied global market would
be able to absorb disruptions that have cut Libya's crude
production to a trickle. Oil is one of Canada's major exports.
            
    Canadian factory sales decreased by 0.6% in November from
October, affected by rail transportation disruptions. That was a
bigger drop than the 0.3% decline that analysts had forecast,
although there was an upward revision to the prior month.
            
    "Transitory factors aside, the second half of 2019 wasn't
kind to Canadian manufacturers," Josh Nye, a senior economist at
RBC Economics, said in a note.
    The manufacturing data could support a view that Canada's
economic growth slowed in the fourth quarter. 
    The Bank of Canada is due to update its outlook for the
economy on Wednesday, when it is expected to leave its benchmark
interest rate on hold at 1.75%.           
    Earlier this month, Bank of Canada Governor Stephen Poloz
said there was still plenty of uncertainty about what a Phase 1
trade deal between the United States and China could mean for
Canadian exports. Canada sends about 75% of its exports to the
United States. 
    "The key takeaway tomorrow is how Poloz is viewing the Phase
1 deal and what kind of implications that holds for policy,"
Harvey said.    
    The Canadian government will unveil legislation to ratify
the United States-Mexico-Canada trade deal on Jan. 29, Prime
Minister Justin Trudeau said on Tuesday.             
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 6 Canadian cents to yield 1.620% and the 10-year
            was up 51 Canadian cents to yield 1.509%.
    The 10-year yield touched its lowest intraday level since
Dec. 4 at 1.497%.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Peter Cooney)
  
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