September 27, 2018 / 3:41 PM / 3 months ago

CANADA FX DEBT-C$ hits two-week low as investors trim bets on NAFTA deal

 (Adds strategist's quotes, details throughout; updates prices)
    * Canadian dollar falls 0.3 percent vs greenback
    * Loonie touches C$1.3083, its weakest level since Sept. 11
    * Price of U.S. oil rises 0.5 percent 
    * Canadian bond prices edge lower across much of yield curve

    By Fergal Smith
    TORONTO, Sept 27 (Reuters) - The Canadian dollar fell to a
two-week low against an advancing greenback on Thursday, after
criticism of Canada's negotiating position on NAFTA by U.S.
President Donald Trump lowered expectations for a trade deal by
a Sunday deadline.
    Trump on Wednesday blasted Canada over the slow pace of
talks to revamp the North American Free Trade Agreement, known
as NAFTA. But Canada's Prime Minister Justin Trudeau dismissed
the criticism, saying Canadians were tough negotiators.
            
    "Markets have priced in a lower probability of a NAFTA deal
this weekend," said Greg Anderson, global head of foreign
exchange strategy at BMO Capital Markets in New York. "That
pushed us through $1.3050 and it snowballed from there."
    Canada sends about 75 percent of its exports to the United
States, so its economy could be hurt if a deal is not reached or
if Trump follows through on a threat to impose tariffs on
Canadian autos.
    At 11:04 a.m. EDT (1504 GMT), the Canadian dollar         
was trading 0.3 percent lower at 1.3062 to the greenback, or
76.56 U.S. cents. It touched its weakest level since Sept. 11 at
$1.3083.
    "I still think there is a reasonable probability of a deal
this weekend," Anderson said. "It always gets the most intense
right at the end on any type of negotiation because people
actually have to move red lines."
    Trump has already concluded a text with Mexico, the third
country in NAFTA, and is threatening to leave out Canada unless
it signs up by the end of the month.
    The U.S. dollar        climbed against a basket of six major
currencies one day after the U.S. Federal Reserve raised
interest rates for the third time this year.             
    The Bank of Canada has also been hiking rates this year. BoC
Governor Stephen Poloz could provide clues on prospects of
another hike in October when he speaks later today. The central
bank will release his prepared remarks at 5:45 p.m. EDT.
    The price of oil, one of Canada's major exports, was
supported by the prospect of a shortfall in global supply once
U.S. sanctions against major crude exporter Iran come into
force.             
    U.S. crude        prices were up 0.5 percent at $71.90 a
barrel.      
    Canadian government bond prices edged lower across much of
the yield curve, with the 10-year             falling 3 Canadian
cents to yield 2.42 percent. On Tuesday, the 10-year yield
touched its highest in over four months at 2.472 percent.

 (Reporting by Fergal Smith, editing by G Crosse)
  
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