December 5, 2017 / 9:43 PM / 10 days ago

CANADA FX DEBT-C$ retreats from 6-week high ahead of BoC rate decision

 (Adds analyst quotes and details on oil, U.S. dollar and yield
curve; updates prices)
    * Canadian dollar at C$1.2698, or 78.75 U.S. cents
    * Loonie touches its strongest since Oct. 24 at C$1.2624
    * Canada's trade deficit narrows to C$1.47 billion in
October
    * Canadian bond prices rise across a flatter yield curve

    By Fergal Smith
    TORONTO, Dec 5 (Reuters) - The Canadian dollar pulled back
from a six-week high against its broadly firmer U.S. counterpart
on Tuesday, as investors weighed a rebound in the country's
exports before turning attention to a Bank of Canada interest
rate decision on Wednesday.
    At 4 p.m. ET (2100 GMT), the Canadian dollar          was
trading at C$1.2698 to the greenback, or 78.75 U.S. cents, down
0.2 percent. It touched its strongest intraday since Oct. 24 at
C$1.2624.
    "We are moving into event risk such as the Bank of Canada
interest rate decision tomorrow," said Jeff Scott, senior
currency strategist at OFX. "Maybe people don't want to be
holding onto (Canadian) dollars."
    Canada's trade deficit narrowed to C$1.47 billion in October
from a revised C$3.36 billion in September as exports increased
after four consecutive monthly declines. Economists had forecast
a deficit of C$2.70 billion.             
    "This report, combined with last week's stellar employment
report, will be looked favorably upon by the data dependent Bank
of Canada," said Dina Ignjatovic, an economist at TD Bank in a
research note.
    Economists expect the Bank of Canada to leave its benchmark
interest rate on hold at 1 percent on Wednesday due to a number
of uncertainties that could affect the domestic economy,
including renegotiation of the North American Free Trade
Agreement.
    The central bank raised rates in July and September for the
first time in seven years.
    The loonie dipped despite a rise in the price of oil, one of
Canada's major exports.
    U.S. crude        futures settled 0.3 percent higher at
$57.62 a barrel, supported by strong demand, expectations of a
drop in U.S. crude inventories and an OPEC-led deal to extend
oil output cuts.             
    The U.S. dollar        rose against a basket of major
currencies for a second straight session, benefiting from
optimism surrounding U.S. tax reform.             
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 2 Canadian cents to yield
1.539 percent and the 10-year             rising 22 Canadian
cents to yield 1.898 percent.
    The gap between the 2 and 10-year yields narrowed by 1.5
basis points to a spread of 35.9 basis points, its narrowest
since January 2008, tracking a flatter U.S. yield curve.
            

 (Reporting by Fergal Smith; Editing by David Gregorio and Diane
Craft)
  

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