May 22, 2018 / 8:00 PM / in a month

CANADA FX DEBT-C$ sticks to holding pattern as NAFTA uncertainty lingers

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    * Canadian dollar at $1.2816, or 78.03 U.S. cents
    * Loonie touches its strongest since May 11 at C$1.2742
    * Bond prices lower across a flatter yield curve

    By Fergal Smith
    TORONTO, May 22 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Tuesday, pulling back from an
earlier 11-day high as NAFTA trade pact uncertainty offset
higher oil prices and stronger-than-expected domestic wholesale
trade data.
    At 3:38 p.m. EDT (1938 GMT), the Canadian dollar         
was trading 0.2 percent lower at C$1.2816 to the greenback, or
78.03 U.S. cents.
    The loonie touched its strongest since May 11 at C$1.2742.
But without clarity on prospects for the North American Free
Trade Agreement, which is being renegotiated by Canada, the
United States and Mexico, it may be difficult for the currency
to exit its recent range of C$1.2730 to C$1.2998.
    "Oil and other commodities suggest the Canadian dollar is
undervalued ... whereas interest rate spreads and continuing
NAFTA uncertainty are pushing things in the opposite direction,"
said Michael Goshko, corporate risk manager at Western Union
Business Solutions.
    U.S. Treasury Secretary Steven Mnuchin on Monday said major
issues remained in talks.             
    Canada sends about 75 percent of its exports to the United
States, so its economy could be hurt if a deal on NAFTA is not
reached.        
    Canadian wholesale trade jumped by 1.1 percent in March,
greater than the 0.6 percent gain forecast by analysts, thanks
largely to strength in the motor vehicle and parts subsector,
Statistics Canada said.             
    The price of oil, one of Canada's major exports, notched a
3-1/2-year high, supported by concern that falling Venezuelan
crude output and a potential drop in Iranian exports could
further tighten global supply.             
    U.S. crude oil futures        settled 0.2 percent higher at
$72.13 a barrel.
    Canadian government bond prices were lower across a flatter
yield curve as trading resumed following Monday's Victoria Day
holiday. The two-year            fell 2 Canadian cents to yield
2.043 percent and the 10-year             declined 3.5 Canadian
cents to yield 2.490 percent.     
    On Thursday, the 10-year yield touched its highest in more
than four years at 2.537 percent.

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Jonathan Oatis)
  
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