June 13, 2018 / 9:22 PM / 3 months ago

CANADA FX DEBT-C$ gyrates after Fed rate hike; recovers from 1-week low

 (Adds strategist quote and details on activity; updates prices)
    * Canadian dollar at C$1.2985, or 77.01 U.S. cents
    * Loonie touches its weakest intraday since June 5 at
C$1.3052
    * Price of U.S. oil rises 0.4 percent
    * Bond prices lower across a flatter yield curve

    By Fergal Smith
    TORONTO, June 13 (Reuters) - The Canadian dollar edged
higher against its U.S. counterpart on Wednesday, with the
currency rebounding from an earlier one-week low as oil prices
rose and the Federal Reserve hiked interest rates, as expected,
for a second time this year.
    The price of oil, one of Canada's major exports, turned
positive after a bigger-than-expected decline in U.S. crude
inventories along with surprise drawdowns in gasoline and
distillates indicated strong demand in the world's top oil
consumer.             
    U.S. crude oil futures        settled 0.4 percent higher at
$66.64 a barrel.
    Federal Reserve officials saw the likelihood of two more
interest rate increases for a total of four in 2018 based on a
solid economic outlook.    
    "There was a lot of volatility in the markets with the Fed
announcement," said Rahim Madhavji, President at Knightsbridge
Foreign Exchange. "The Canadian dollar went for a bit of a
ride."        
    At 5 p.m. EDT (2100 GMT), the Canadian dollar          was
trading 0.2 percent higher at C$1.2985 to the greenback, or
77.01 U.S. cents. The currency touched its weakest intraday
level since June 5 at C$1.3052.
    "The Fed really isn't impacted by the trade noise that is
going on in the market, Madhavji said. "The fact that it wasn't
points to more potential weakness for the loonie."
    Canadian Foreign Minister Chrystia Freeland said after talks
with members of the U.S. Senate Foreign Relations Committee on
Wednesday that U.S. trade actions against Canada are illegal
under World Trade Organization rules.             
    U.S. tariffs on Canadian steel and aluminum imports come
amid slow-moving talks between Canada, the United States and
Mexico to modernize the North American Free Trade Agreement
(NAFTA). Canada sends about 75 percent of its exports to the
United States, so its economy could be hurt if NAFTA were
scrapped.    
    Canadian government bond prices were lower across a flatter
yield curve in sympathy with U.S. Treasuries. The 10-year
            fell 20 Canadian cents to yield 2.321 percent.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and Tom
Brown)
  
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