November 29, 2018 / 9:58 PM / 12 days ago

CANADA FX DEBT-C$ clings to most of prior day's gains as oil rallies

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar dips 0.1 percent against the greenback
    * Price of U.S. oil rises 2.3 percent
    * Canada's Q3 current account deficit narrows to C$10.34
billion
    * Canadian bond prices rise across the yield curve

    By Fergal Smith
    TORONTO, Nov 29 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Thursday but held on to most of
its gains from the day before as oil prices rallied and data
showed that Canada ran a smaller-than-expected current account
deficit in the third quarter.
    The price of oil, one of Canada's major exports, rose after
industry sources said Russia had accepted the need to cut
production, together with the Organization of the Petroleum
Exporting Countries ahead of its meeting next week.             
    U.S. crude oil futures        settled 2.3 percent higher at
$51.45 a barrel.
    "It does appear as if for crude, specifically, that we have
found a bit of a floor," said Shaun Osborne, chief currency
strategist at Scotiabank. "I think that should be positive for
the CAD in the near to medium term."            
    Canada's current account deficit narrowed to C$10.34 billion
in the third quarter from a revised C$16.68 billion deficit in
the second quarter, Statistics Canada said. Analysts had
forecast a deficit of C$11.50 billion.             
    The improvement reflected better prices for Canada's exports
that have since "melted away," said Avery Shenfeld, chief
economist at CIBC Capital Markets.
    At 4:20 p.m. (2120 GMT), the Canadian dollar          was
trading 0.1 percent lower at 1.3285 to the greenback, or 75.27
U.S. cents. The currency traded in a range of 1.3254 to 1.3314.
    On Wednesday, the loonie hit a five-month low intraday at
1.3360 before rallying on comments from Federal Reserve Chairman
Jerome Powell that were seen as dovish by some investors.
    "I would expect (Canadian) interest rate differentials to
narrow in the next few months against the U.S. dollar, (which
is) a bit more supportive of the CAD," Scotiabank's Osborne
said.
    The Bank of Canada hiked interest rates last month for the
fifth time since July 2017 after an agreement among Canada, the
United States and Mexico on a new North American trade pact
reduced uncertainty for Canada's economy.
    But a day before the countries are due to sign the
agreement, negotiators are still thrashing out what exactly they
will be putting their names to, officials said.                
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 4 Canadian cents to yield
2.188 percent and the 10-year             rising 20 Canadian
cents to yield 2.304 percent.
    The 10-year yield touched its lowest intraday since Sept. 10
at 2.289 percent.
    Canada's gross domestic product data for the third quarter
is due on Friday.

 (Reporting by Fergal Smith; Editing by Susan Thomas and Peter
Cooney)
  
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