May 9, 2019 / 8:33 PM / 2 months ago

CANADA FX DEBT-C$ recovers from 2-week low as trade signals drive FX market

 (Adds dealer quotes and details on activity; updates prices)
    * Canadian dollar rises 0.1% against the greenback
    * Loonie touches its weakest intraday since April 25 at
1.3505
    * Canada's trade deficit narrows to C$3.21 billion in March
    * Canadian bond prices rise across the yield curve

    By Fergal Smith
    TORONTO, May 9 (Reuters) - The Canadian dollar rose against
its U.S. counterpart on Thursday, rebounding from an earlier
two-week low ahead of domestic jobs data and as the U.S.-China
trade conflict weighed on the greenback against other safe-haven
currencies.
    Global equities          slumped to a more than five-week
low after U.S. President Donald Trump ratcheted up trade
tensions with China ahead of a high-stakes negotiation.
            
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could be hurt by a
slowdown in the global flow of capital or trade.
    "The price action is being completely driven by the pending
decision of whether or not the White House will raise taxes on
Chinese goods," said Brad Schruder, director of corporate sales
and structuring at BMO Capital Markets
    "Long (U.S.) dollar positions were trimmed against other
safe-haven currencies, such as the Japanese yen and the Swiss
franc. That prompted some U.S. dollar weakness across the board
and goes a long way to explaining why the Canadian dollar is
slightly better on the day," Schruder said.
    The U.S. dollar        declined against a basket of major
currencies, while the price or oil, one of Canada's major
exports, settled 0.7% lower at $61.70 a barrel.
                        
    Still, oil pared earlier losses after Trump revived investor
hopes that the United States might not raise tariffs on Chinese
imports.
    At 4:03 p.m. (2003 GMT), the Canadian dollar          was
trading 0.1% higher at 1.3461 to the greenback, or 74.29 U.S.
cents. Earlier in the session, the currency touched its weakest
level since April 25 at 1.3505.
    Canada's trade deficit in March shrank slightly to C$3.21
billion as higher energy shipments helped exports increase at a
slightly faster rate than imports, Statistics Canada said. The
deficit was greater than the C$2.45 billion shortfall that
analysts had predicted.             
    Separate data showed that new housing prices in Canada were
unchanged in March for the seventh month out of eight, with
little or no growth in the major markets of Toronto and
Vancouver.             
    Canada's jobs report for April is due on Friday, which could
help guide expectations for future interest rate decisions from
the Bank of Canada.
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 2.7 Canadian cents to yield 1.583% and the 10-year
            climbed 20 Canadian cents to yield 1.685%.

 (Reporting by Fergal Smith; Editing by David Gregorio and Peter
Cooney)
  
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