December 19, 2017 / 9:37 PM / 6 months ago

CANADA FX DEBT-C$ hits 5-month low as U.S. tax bill approval boosts greenback

 (Adds analyst quotes and details on tax bill approval; updates
prices)
    * Canadian dollar at C$1.2871, or 77.69 U.S. cents
    * Loonie touches its weakest since July 12 at C$1.2920
    * Bond prices lower across a steeper yield curve
    * 10-year yield touches highest since Oct. 25 at 1.762
percent

    By Fergal Smith
    TORONTO, Dec 19 (Reuters) - The Canadian dollar hit a
five-month low against its U.S. counterpart on Tuesday before
paring some losses, while bond yields climbed as investors
weighed the potential impact of an expected U.S. tax overhaul.
    At 4 p.m. (2100 GMT), the Canadian dollar          was
trading at C$1.2871 to the greenback, or 77.69 U.S. cents, down
0.1 percent.
    The currency's strongest level of the session was C$1.2852,
while it touched its weakest since July 12 at C$1.2920.
    Rising U.S. bond yields in anticipation of tax legislation
helped boost the greenback, said Greg Anderson, global head of
foreign exchange strategy at BMO Capital Markets.
    "We are already in thin holiday markets, so just a little
bit of emotion, a little bit of flow can take things a long
ways."
    The Republican-controlled U.S. House of Representatives
approved a sweeping, debt-financed tax bill, sending it to the
Senate, where lawmakers were due to take up the package later in
the evening.             
    The U.S. dollar        also benefited from data showing that
U.S. domestic home construction rose unexpectedly in November to
a 13-month peak. It gained ground against the safe-haven
Japanese yen but slipped against the euro.
    Prices of oil, one of Canada's major exports, were supported
by a North Sea pipeline outage, OPEC-led supply cuts and
expectations that U.S. crude inventories probably fell for a
fifth week.             
    U.S. crude futures        settled 0.5 percent higher at
$57.46 a barrel.
    Lending to Canadian small businesses slowed in October as
the manufacturing and agriculture sectors pulled back with the
broader economy expected to show a cooler pace of growth in the
second half of 2017, data showed.             
    The loonie fluctuated last week on remarks by Bank of Canada
Governor Stephen Poloz and weaker-than-expected domestic
manufacturing data.             
    Wholesale trade data for October is due on Wednesday, while
Canada's inflation report for November and October retail sales
data are expected on Thursday and gross domestic product data
for October due on Friday.
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
           fell 6 Canadian cents to yield 1.603 percent and the
10-year             declined 64 Canadian cents to yield 1.937
percent.
    The 10-year yield touched its highest intraday since Oct. 25
at 1.762 percent.

 (Reporting by Fergal Smith; Editing by Phil Berlowitz and Peter
Cooney)
  
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