September 6, 2018 / 8:01 PM / 17 days ago

CANADA FX DEBT-C$ rebounds from 7-week low on Bank of Canada comments

 (Add strategists quotes and details throughout, updates prices)
    * Canadian dollar at C$1.3139, or 76.11 U.S. cents
    * Bond prices mixed across the yield curve

    By Fergal Smith
    TORONTO, Sept 6 (Reuters) - The Canadian dollar strengthened
against the greenback on Thursday, recovering from a nearly
seven-week low earlier in the day after a senior Bank of Canada
official said the central bank had discussed the pace at which
it could raise interest rates.
    On Wednesday, the Bank of Canada left its policy rate on
hold at 1.50 percent.             
    The central bank discussed whether the gradual approach to
raising rates that it has been taking over the past year
remained appropriate, Bank of Canada Senior Deputy Governor
Carolyn Wilkins said in a speech.
    Wilkins indicated the central bank may be forced to raise
interest rates if talks to renegotiate the North American Free
Trade Agreement fail, saying protectionist measures could spur
inflation.                 
    "On balance, a shift to a faster pace of rate hikes seems
more likely than any kind of pause," said Adam Button, a
currency analyst at ForexLive.
    At 3:12 p.m. (1912 GMT), the Canadian dollar          was
trading 0.3 percent higher at C$1.3139 to the greenback, or
76.11 U.S. cents.
    The currency's strongest level of the session was C$1.3128,
while it touched its weakest since July 20 at C$1.3226.
    The loonie had been pressured by the prospect of an
escalation in a trade dispute between the United States and
China, with U.S. President Donald Trump gearing up to impose
tariffs on $200 billion in Chinese goods and Beijing certain to
retaliate against any measures.                 
    Canada exports many commodities and runs a current account
deficit, so its economy could be hurt if the global flow of
trade or capital slows.
    "Canadian dollar traders are trying to balance the positive
risks of a NAFTA deal and the negative risks of a China trade
war," Button said.
    U.S. and Canadian negotiators started a second day of talks
aimed at rescuing NAFTA as the deadline for a deal this week,
set out by Trump, inched closer.                 
    The price of oil, one of Canada's major exports, fell as
emerging market woes weighed on sentiment. U.S. crude       
prices settled 1.4 percent lower at $67.77 a barrel.
    The value of Canadian building permits decreased by 0.1
percent in July from June, Statistics Canada said.             
    Canada's jobs report for August is due on Friday.
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 2.5 Canadian
cents to yield 2.064 percent and the 10-year             rising
12 Canadian cents to yield 2.227 percent.

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