August 29, 2018 / 7:13 PM / 3 months ago

CANADA FX DEBT-C$ holds on to gains on NAFTA trade deal optimism

 (Adds strategist quotes, new throughout)
    * Canadian dollar at C$1.2923, or 77.38 U.S. cents
    * Price of U.S. oil rises 1.4 percent
    * Bond prices rise across the yield curve

    By Fergal Smith
    TORONTO, Aug 29 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Wednesday to keep hold of this
week's gains as investors remained optimistic that Canada would
secure a deal on a revamped NAFTA trade pact.
    Canada said a deal to salvage the trilateral North American
Free Trade Agreement (NAFTA) is possible by a Friday deadline,
but it will be hard work to resolve specific issues as talks
with the United States entered a second day.             
    "There is some modest confidence in the prospect of a deal
ahead of Friday," said Eric Theoret, a currency strategist at
Scotiabank. "I think the market is taking a wait and see
approach and not ready to commit at this time."
    Canada sends about 75 percent of its exports to the United
States, so its economy could benefit if a trilateral trade deal
with the U.S. and Mexico is reached.
    At 2:42 p.m. (1842 GMT), the Canadian dollar          was
trading 0.1 percent higher at C$1.2923 to the greenback, or
77.38 U.S. cents. The currency, which notched a nearly
three-month high on Tuesday at C$1.2887, traded in a range of
C$1.2904 to C$1.2966.
    The modest gain for the loonie came ahead of Canadian gross
domestic product data on Thursday that could help guide
expectations for another interest rate hike from the Bank of
Canada as soon as next week.           
    The central bank has hiked four times since July 2017 to
leave its policy rate at 1.50 percent.
    Data from Statistics Canada showed on Wednesday that the
country's current account deficit narrowed to C$15.9 billion in
the second quarter from a revised C$17.5 billion gap in the
first quarter.             
    The price of oil, one of Canada's major exports, was
supported by a drawdown in U.S. crude and gasoline stockpiles
and on news of falling Iranian crude shipments as U.S. sanctions
deter buyers.             
    U.S. crude oil futures        settled 1.4 percent higher at
$69.51 a barrel.
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 1.5 Canadian cents to
yield 2.14 percent and the 10-year             rising 5 Canadian
cents to yield 2.315 percent.

 (Reporting by Fergal Smith
Editing by Chizu Nomiyama and Susan Thomas)
  
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