January 18, 2018 / 2:40 PM / 5 months ago

CANADA FX DEBT-C$ slips as Trump stokes worries on NAFTA outlook

    * Canadian dollar at C$1.2464, or 80.23 U.S. cents
    * Bond prices lower across much of a steeper yield curve
    * Canada-U.S. 10-year spread widens by 1.8 basis points

    TORONTO, Jan 18 (Reuters) - The Canadian dollar weakened
against its American counterpart on Thursday, after comments by
U.S. President Donald Trump the day before appeared to validate
concerns that the United States looks increasingly likely to
pull out from NAFTA.
    Trump said that terminating the North American Free Trade
Agreement would result in the "best deal" to revamp the
24-year-old trade pact with Canada and Mexico in favor of U.S.
interests.             
    The future of NAFTA future was the most significant downside
risk cited by the Bank of Canada on Wednesday, in an otherwise
bullish report on the outlook for Canada's economic growth.
            
    Canada sends about 75 percent of its exports to the United
States.
    The central bank on Wednesday raised its benchmark interest
rate by 25 basis points to 1.25 percent, its highest since
January 2009, after recent data showed stronger inflation and
strong job growth.
    But a report released on Thursday by ADP showed that Canada
shed 7,100 jobs in December, driven by cuts in the
manufacturing, education and trade sectors.             
    At 9:16 a.m. EST (1416 GMT), the Canadian dollar         
was trading at C$1.2464 to the greenback, or 80.23 U.S. cents,
down 0.2 percent.
    The currency traded in a range of C$1.2430 to C$1.2479.
    Lower prices of oil, one of Canada's major exports, added to
pressure on the loonie. U.S. crude        prices were down 0.4
percent at $63.73 a barrel after a reported rise in American
fuel supplies and expectations that OPEC-led efforts to boost
prices by cutting output will increase supply from the United
States and other rivals.                 
    Canadian government bond prices were lower across much of a
steeper yield curve in sympathy with U.S. Treasuries, with the
10-year             falling 8 Canadian cents to yield 2.215
percent.
    The gap between Canada's 10-year yield and its U.S.
equivalent widened by 1.8 basis points to a spread of -39.2
basis points, its widest since Jan. 3.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis)
  
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