January 30, 2018 / 9:33 PM / 4 months ago

CANADA FX DEBT-C$ firms against weaker greenback ahead of Trump address

 (Adds strategist quote and details on U.S. dollar, updates
prices)
    * Canadian dollar at C$1.2329, or 81.11 U.S. cents
    * Bond prices lower across a steeper yield curve
    * Oil prices fall 1.6 percent

    By Fergal Smith
    TORONTO, Jan 30 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Tuesday as the greenback dipped
broadly ahead of U.S. President Donald Trump's State of the
Union address and an interest rate decision by the Federal
Reserve.
    At 4 p.m. (2100 GMT), the Canadian dollar CAD=D4 was trading
0.1 percent higher at C$1.2329 to the greenback, or 81.11 U.S.
cents.
    The currency traded in a range of C$1.2310 to C$1.2378. Last
week, the loonie touched its strongest level in more than four
months at C$1.2283.
    Attention on Trump's speech on Tuesday night was mostly on
his views on an infrastructure overhaul and trade, with the
future of the North American Free Trade Agreement hanging in the
balance.             
    "It does appear that the president has become a little bit
more aware of what pulling out of NAFTA might mean for the U.S.
economy and perhaps even the U.S. equity market, which he pays
close attention to," said Shaun Osborne, chief currency
strategist at Scotiabank. 
    Trump's trade chief rejected Canadian proposals for
unblocking NAFTA modernization talks on Monday but pledged to
seek "breakthroughs" by late February, easing concerns that
Washington would soon withdraw from the trilateral pact.
            
    Fed Chair Janet Yellen was expected to keep the central bank
on course for more interest rate rises at her final meeting in
charge. The rate decision is due on Wednesday.
    World stocks retreated for a second straight day and the
price of oil, one of Canada's major exports, also fell, as
nerves about rising global borrowing costs cooled financial
markets' euphoric start to the year.             
    U.S. crude        prices settled 1.6 percent lower at $64.50
a barrel.             
    After six straight weekly declines, the U.S. dollar index
       was on track to fall about 3.2 percent for the month,
which would be its biggest monthly fall since March 2016.
            
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year            down 1 Canadian cent
to yield 1.831 percent and the 10-year             falling 13
Canadian cents to yield 2.297 percent.
    On Monday, the 10-year yield touched its highest intraday
level since September 2014 at 2.314 percent.
    Canadian gross domestic product data for November is due on
Wednesday. The economy is forecast to have grown by 0.4 percent,
a Reuters poll shows, regaining momentum after pausing in
October.       

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter
Cooney)
  
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