October 2, 2018 / 8:04 PM / a month ago

CANADA FX DEBT-C$ clings to NAFTA deal gains, beating most other currencies

    * Canadian dollar trades near flat against the greenback
    * Loonie holds near a four-month high
    * Canadian bond prices rise across a flatter yield curve
    * Quebec bond yields fall as CAQ wins power in province 

    By Fergal Smith
    TORONTO, Oct 2 (Reuters) - The Canadian dollar was little
changed against its broadly stronger U.S. counterpart on
Tuesday, holding on to most of the gains that followed a deal
over the weekend to revamp the NAFTA trade pact.
    The deal to salvage the trilateral North American Free Trade
Agreement has reduced uncertainty for Canada's trade-dependent
economy, boosting investor expectations for as many as four
additional interest rate increases from the Bank of Canada by
the end of 2019.                  
    The first of those hikes is expected at the bank's Oct. 24
policy meeting.           
    Buoyed by the trade deal, Canada has been pressing
Washington to remove steel and aluminum tariffs.             
    A U.S. agreement to drop metal tariffs could trigger
additional gains for the loonie, said Greg Anderson, global head
of foreign exchange strategy in New York at BMO Capital Markets.
    The U.S. dollar        climbed against a basket of
currencies as the euro was pressured by Italian political
developments.             
    At 3:38 p.m. (1938 GMT), the Canadian dollar          was
trading nearly unchanged at C$1.2819 to the greenback, or 78.01
U.S. cents, outperforming every other G10 currency except the
safe-haven yen and Swiss franc.
    The loonie, which on Monday touched its strongest level in
more than four months at C$1.2783, traded in a narrow range
between 1.2800 and 1.2840.
    Its outperformance came as a massive liquefied natural gas
(LNG) export project in Canada received final approval from its
partners, making it the first major new project for the fuel to
win approval in recent years.                 
    The price of oil, one of Canada's major exports, remained
near its highest since November 2014 as markets braced for
tighter supply. U.S. crude oil futures        settled 0.1
percent lower at $75.23 a barrel.             
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries, with the 10-year
            rising 35 Canadian cents to yield 2.464 percent. The
yield on the 10-year on Monday reached 2.519 percent, its
highest in more than four months.
    The center-right Coalition Avenir Quebec, campaigning on a
promise to curb immigration, won power for the first time in
Canada's Quebec province on Monday, ousting the Liberal
incumbents.             
    The yield on Quebec's 10-year bond fell 6 basis points to
3.056 percent, which was more than the 5-basis-points drop for
Ontario's bond of the same maturity.
    Canada's jobs data for September and August trade data are
due on Friday.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky)
  
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