July 11, 2018 / 1:13 PM / 4 days ago

CANADA FX DEBT-C$ hits 1-week low on trade worries, before rate decision

    * Canadian dollar at C$1.3129, or 76.17 U.S. cents
    * Price of U.S. oil falls 1.1 percent
    * Bond prices lower across the yield curve

    TORONTO, July 11 (Reuters) - The Canadian dollar weakened to
a one-week low against the greenback on Wednesday ahead of an
expected interest rate hike by the Bank of Canada, and as trade
tensions between the United States and China pressured stocks
and commodity prices.
    U.S. stock index futures slumped after the United States
threatened tariffs on an additional $200 billion worth of
Chinese goods, damping hopes of a compromise on trade.
            
    Canada, which has its own trade dispute with the United
States, exports many commodities and runs a current account
deficit so its economy could also be hurt if the flow of trade
or capital slows.
    The price of oil, one of Canada's major exports, was
pressured by the threat of tariffs and after Libya announced the
reopening of key oil export terminals. U.S. crude        prices
were down 1.1 percent at $73.32 a barrel.             
    At 8:52 a.m. EDT (1252 GMT), the Canadian dollar         
was trading 0.1 percent lower at C$1.3129 to the greenback, or
76.17 U.S. cents. The currency touched its weakest since July 3
at C$1.3173.
    The trade row between Canada and the United States will not
be enough to stop the Bank of Canada from raising rates on
Wednesday, but bigger storm clouds over trade could mean it is
the last hike for a while, analysts say.                      
    The central bank has raised its policy rate three times
since last summer to a level of 1.25 percent.
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 2 Canadian cents to
yield 1.948 percent and the 10-year             falling 11
Canadian cents to yield 2.162 percent.
    The gap between the 2-year yield and its U.S. equivalent
narrowed by 2.8 basis points to a spread of -63.0 basis points.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)
  
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