February 28, 2018 / 9:51 PM / 24 days ago

CANADA FX DEBT-C$ slumps in February by most since Alberta wildfire

 (Adds portfolio manager quotes, details throughout; updates
    * Canadian dollar at C$1.2829, or 77.95 U.S. cents
    * Loonie touches weakest since Dec. 20 at C$1.2841
    * Oil falls 2.2 percent
    * Bond prices higher across flatter yield curve

    By Fergal Smith
    TORONTO, Feb 28 (Reuters) - The Canadian dollar weakened to
a nearly ten-week low against its U.S. counterpart on Wednesday
and was on track to post its biggest monthly decline since the
Alberta wildfire, one day after Ottawa balked at a response to
U.S. tax reform.
    At 4:30 p.m. EST (2100 GMT), the Canadian dollar         
was trading 0.4 percent lower at C$1.2829 to the greenback, or
77.95 U.S. cents. It touched its lowest since Dec. 20 at
    For the month, the loonie was down 4.2 percent, the
currency's worst performance since wildfires ripped through
Alberta's oil sands region in May 2016. Oil is one of Canada's
major exports. 
    Finance Minister Bill Morneau's third budget, released on
Tuesday, outlined slight deficit improvements without much in
the way of new spending, refusing to blink in the face of U.S.
corporate tax cuts that could hurt Canada's competitiveness and
an uncertain outlook for the North American Free Trade
   "Some people in the market expected some kind of a response
from our government and they didn't get that," said Hosen
Marjaee, senior managing director, Canadian fixed income at
Manulife Asset Management. "It seems like going forward we don't
have a lot going for us in terms of engines of growth."
    The pace of capital expenditures in Canada is expected to
cool in 2018 as a slowdown in spending intentions from the
public sector are offset by increased investment in machinery
and equipment, data from Statistics Canada showed.             
    Figures for Canada's fourth-quarter economic growth will be
released on Friday, with analysts expecting the annualized rate
to come in below the Bank of Canada's 2.5 percent forecast.
    Losses for the loonie came as the U.S. dollar        climbed
to a five-week high against a basket of major currencies. The
greenback was buoyed by an upbeat assessment of the U.S. economy
from the Federal Reserve's new chairman.       
    U.S. crude oil futures        settled 2.2 percent lower at
$61.64 a barrel after data showing a build in U.S. crude
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 3.5 Canadian cents to yield 1.787 percent and
the 10-year             climbed 28 Canadian cents to yield 2.236
    Canada is cutting down issuance of bonds in the 2018-19
fiscal year by 17 percent as the government runs a smaller
budget deficit and market participants demand greater supply of
more liquid T-bills.             

 (Reporting by Fergal Smith; editing by Diane Craft)
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