October 4, 2018 / 8:21 PM / 2 months ago

CANADA FX DEBT-C$ gives up its NAFTA gains as commodity currencies slide

 (Adds strategists quotes and details throughout; updates
prices))
    * Canadian dollar declines 0.5 percent against the greenback
    * Loonie touches its weakest since last Friday at 1.2938
    * The Australian and New Zealand dollars also lose ground
    * Canada's 10-year yield nears a five-year high at 2.584
percent

    By Fergal Smith
    TORONTO, Oct 4 (Reuters) - The Canadian dollar weakened
against the greenback on Thursday, giving up the gains that
followed a deal over the weekend to revamp the NAFTA trade pact,
as lower oil and metal prices pressured the currencies of
commodity producing countries.
    The price of oil, one of Canada's major exports, fell as the
prospect of increased crude production from Saudi Arabia and
Russia prompted profit-taking the day after futures hit
four-year highs.             
    U.S. crude oil futures        settled 2.7 percent lower at
$74.33 a barrel, while copper futures        declined 1.8
percent.
    "It's really a commodities play," said Michael Goshko,
corporate risk manager at Western Union Business Solutions.
    The three worst performing G10 currencies were the
commodity-linked Canadian, Australian and New Zealand dollars.
    At 3:40 p.m. (1940 GMT), the Canadian dollar          was
trading 0.5 percent lower at 1.2931 to the greenback, or 77.33
U.S. cents.
    It touched its weakest level since last Friday at 1.2938,
which was before a deal was clinched to salvage the North
American Free Trade Agreement. On Monday, the loonie touched its
strongest in more than four months at 1.2783.
    Declines for commodity-linked currencies came as U.S.
Treasury yield pushed to multi-year highs ahead of U.S. jobs
data on Friday that could show the American economy growing at a
robust pace.
    Canada's jobs data is also due on Friday. Ivey Purchasing
Managers Index data released on Thursday showed that purchasing
activity in Canada expanded in September at its slowest pace in
more than two years as a measure of employment tumbled.
            
    "We have got huge numbers tomorrow both north and south of
the border," Goshko said. "So we could be looking at an entirely
different picture in the morning."
    The Canadian dollar will rally over the coming year,
according to currency strategists in a Reuters poll who raised
their forecasts for the currency as the deal to salvage NAFTA
reduced economic uncertainty.             
    Canadian government bond prices were mixed across a steeper
yield curve, with the two-year            up 1.5 Canadian cents
to yield 2.307 percent and the 10-year             falling 1
Canadian cent to yield 2.553 percent.
    The 10-year yield touched its highest intraday since January
2014 at 2.584 percent.

 (Reporting by Fergal Smith; editing by Diane Craft)
  
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