July 9, 2018 / 1:30 PM / 3 months ago

CANADA FX DEBT-C$ firms, near 4-week high ahead of potential rate hike

    * Canadian dollar at C$1.3074, or 76.49 U.S. cents
    * Loonie touches its strongest since June 14 at C$1.3069
    * Bond prices lower across the yield curve

    TORONTO, July 9 (Reuters) - The Canadian dollar strengthened
to a nearly four-week high against its U.S. counterpart on
Monday as oil prices rose and investors braced for a potential
interest increase from the Bank of Canada later in the week.
    At 9:14 a.m. EDT (1314 GMT), the Canadian dollar         
was trading 0.1 percent higher at C$1.3074 to the greenback, or
76.49 U.S. cents. The currency touched its strongest since June
14 at C$1.3069.
    The Bank of Canada will hike interest rates on Wednesday as
strong job growth and rising inflation pressures override
concerns about a deepening trade rift with the United States, a
Reuters poll found.             
    Money markets see a roughly 90-percent chance of a rate
increase. Bets for a hike were boosted by domestic data on
Friday showing a stronger-than-expected jobs gain.
                      
    Meanwhile, healthy U.S. jobs data last week has helped
investors look past rising trade tensions between the United
States and China.             
    Canada exports many commodities, including oil, and runs a
current account deficit so its economy could also be hurt if the
flow of trade or capital slows.
    The country has its own trade feud with the United States
and is also in slow-moving talks with the U.S. and Mexico to
revamp the North American Free Trade Agreement.
    The price of oil was supported by increased global demand
and U.S. efforts to shut out Iranian output using sanctions.
U.S. crude        prices were up 0.3 percent at $73.99 a barrel.
                
    The U.S. dollar        slipped to its lowest in more than
three weeks against a basket of major currencies.             
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 5.5 Canadian cents to
yield 1.942 percent and the 10-year             falling 28
Canadian cents to yield 2.161 percent.
    The gap between the 2-year and 10-year yields steadied at a
spread of 21.9 basis points, its narrowest since December 2007.

 (Reporting by Fergal Smith
Editing by Nick Zieminski)
  
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