June 4, 2018 / 8:42 PM / 3 months ago

REFILE-CANADA FX DEBT-C$ nudges higher as risk appetite perks up

 (Refiles to fix spelling of strategist Amo Sahota, paragraphs
3, 6, Klarity, paragraph 3)
    * Canadian dollar at C$1.2932, or 77.33 U.S. cents
    * The price of U.S. oil falls 1.6 percent
    * Bond prices lower across the yield curve

    By Fergal Smith
    TORONTO, June 4 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Monday as risk appetite improved
and Bank of Canada Governor Stephen Poloz signaled optimism on
the economy.
    At 4 p.m. (2000 GMT), the Canadian dollar        was trading
0.1 percent higher at C$1.2932 to the greenback, or 77.33 U.S.
cents. The currency, which rose 0.2 percent last week, traded in
a range of C$1.2896 to C$1.2964.
    "It seems like there is a little bit of risk-on sentiment
today which has favored USD-CAD moving lower," said Amo Sahota,
director at Klarity FX in San Francisco. 
    World stock indexes and Treasury yields climbed, while the
dollar fell to a two-week low as political tensions in Europe
eased.             
    Canada's commodity-linked currency tends to track movement
in stocks because of the signal that equity markets send about
prospects for growth.
    "This week again is all going to be focused on the political
aspects around trade relationships," Sahota said. 
    Prime Minister Justin Trudeau plays host this week to a
summit of the Group of Seven leading industrialized nations,
with six of the seven members angry at the United States over a
slew of recent moves by President Donald Trump.             
    Canada has vowed to do all it can to protect its steel and
aluminum sectors from U.S. tariffs but sidestepped an industry
call to strike back quickly, saying it needed time to study the
issue.             
    The uncertainty over rising trade tensions and escalating
retaliation in response to U.S. import tariffs means the Bank of
Canada will be data-dependent as it sets monetary policy, Poloz,
the central bank governor, said on Saturday.             
    "He sounded surprised about the tariffs but the message was
still one of optimism on the economy," said Adam Button,
currency analyst at ForexLive.
    Chances of an interest rate hike in July have climbed to 63
percent. They stood at less than 50 percent before a Bank of
Canada policy statement last week that was more hawkish than the
market had expected.            
    The price of oil, one of Canada's major exports, fell to its
lowest level in nearly two months, pressured by growing U.S.
production, possible global supply growth and nagging trade
tensions.      
    U.S. crude oil futures        settled 1.6 percent lower at
$64.75 a barrel.
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries. The 10-year             
declined 25 Canadian cents to yield 2.276 percent.

 (Reporting by Fergal Smith; Editing by Alistair Bell and Peter
Cooney)
  
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