May 29, 2018 / 8:40 PM / in 24 days

CANADA FX DEBT-C$ hits 2-month low amid risk aversion, lower oil prices

 (Adds strategist quote and details throughout; updates prices)
    * Canadian dollar at C$1.3014, or 76.84 U.S. cents
    * Loonie touches its weakest since March 21 at C$1.3047
    * Bond prices higher across the yield curve
    * 10-year yield touches a near seven-week low at 2.165
percent

    By Fergal Smith
    TORONTO, May 29 (Reuters) - The Canadian dollar hit a more
than two-month low against its U.S. counterpart on Tuesday as
oil prices fell and Italian political uncertainty boosted
safe-haven assets, while investors awaited a Bank of Canada
interest rate decision on Wednesday.
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading 0.2 percent lower at C$1.3014 to the greenback, or 76.84
U.S. cents. The currency touched its weakest since March 21 at
C$1.3047.
    "By and large the move in CAD today was reflective of the
risk-off tone," said Bipan Rai, North America head, FX Strategy
at CIBC Capital Markets.
    Investors piled into safe-haven bets as political turmoil in
Italy sparked fears of another euro crisis, driving up the
Japanese yen        and pushing the U.S. dollar to a 10-month
high against the euro       .             
    The price of oil, one of Canada's major exports, was
pressured by expectations that Saudi Arabia and Russia could
pump more crude to compensate for a potential supply shortfall.
            
    U.S. crude oil futures        settled 1.7 percent lower at
$66.73 a barrel.
    Losses for the loonie came ahead of a Bank of Canada
interest rate decision on Wednesday. The central bank will
probably hold interest rates steady as indebted consumers and
uncertain trade policy necessitate caution, a Reuters poll
predicted.                       
    The Canadian government said it will buy Kinder Morgan Ltd's
         Trans Mountain oil pipeline for C$4.5 billion, hoping
to save a project that faces formidable political and
environmental opposition.             
     U.S. President Donald Trump is running out of time to
deliver a revamp of the North American Free Trade Agreement
(NAFTA) he promised for this year, and people involved in the
talks say the crunch is largely of his administration's own
making.             
    Canada sends about 75 percent of its exports to the United
States, so its economy could be hurt if NAFTA collapses.
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries on a flight to quality.
The two-year            rose 17 Canadian cents to yield 1.848
percent and the 10-year             climbed 103 Canadian cents
to yield 2.188 percent.
    The 10-year yield touched its lowest intraday since April 11
at 2.165 percent.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and James
Dalgleish)
  
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