May 3, 2018 / 1:35 PM / 20 days ago

CANADA FX DEBT-C$ pares some gains with trade deficit at record

    * Canadian dollar at C$1.2868, or 77.71 U.S. cents
    * Canada's trade deficit widens in March to C$4.14 billion
    * Bond prices higher across the yield curve

    By Fergal Smith
    TORONTO, May 3 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Thursday, though paring some of
its gains after domestic data showed the March trade deficit had
widened to a record.
    At 9:14 a.m. EDT (1314 GMT), the Canadian dollar         
was trading 0.1 percent higher at C$1.2868 to the greenback, or
77.71 U.S. cents. The currency traded in a range of C$1.2818 to
C$1.2886.    
    The loonie has been in a holding pattern after hitting a
four-week low on Tuesday at C$1.2914.
    Canada's trade deficit in March widened to a record C$4.14
billion, Statistics Canada said.             
    But economists said the data was not all bad news for the
economy, as exports rose and a surge in imports pointed to
strength in domestic demand.
    "Some of the investment-related products were up solidly as
were some of the consumer products," said Doug Porter, chief
economist at BMO Capital Markets. "It's not a clearcut message
for the Bank of Canada."
    Chances of an interest rate hike by July were little changed
after the data at about 75 percent, the overnight index swaps
market indicated.           
    The price of oil, one of Canada's major exports, slipped as
swelling U.S. crude inventories and record weekly U.S.
production clashed with OPEC supply cuts and the potential for
new U.S. sanctions against Iran.             
    U.S. crude        prices were down 0.50 percent at $67.59 a
barrel.
    The U.S. dollar        was little changed, consolidating
some of its recent gains, after the Federal Reserve on Wednesday
held interest rates steady but stayed on course to hike in June.
            
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year            up 3.5 Canadian cents
to yield 1.918 percent and the 10-year             rising 29
Canadian cents to yield 2.330 percent.
    The gap between Canada's 10-year yield and its U.S.
counterpart widened by 1 bp to a spread of -61.1 basis points.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)
  
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