January 13, 2020 / 9:18 PM / 8 days ago

CANADA FX DEBT-C$ sticks to tight range ahead of U.S.-China trade deal signing

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar dips 0.1% against the greenback
    * Bank of Canada survey shows positive business sentiment
    * Price of U.S. oil declines 1.6%
    * Canadian bond prices fall across a steeper yield curve

    By Fergal Smith
    TORONTO, Jan 13 (Reuters) - The Canadian dollar weakened
slightly against its U.S. counterpart on Monday, sticking to a
narrow range as oil prices fell and investors awaited the
signing this week of a preliminary trade deal between the United
States and China.
    At 3:43 p.m. (2043 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3057 to the greenback, or 76.59 U.S.
cents. The currency, which last Thursday hit a near two-week low
intraday at 1.3104, traded in a range of 1.3032 to 1.3068.    
    "It's like watching paint dry today," said Erik Bregar, head
of FX strategy at the Exchange Bank of Canada. "The market
doesn't really have any reason to move until Wednesday. The
U.S-China phase 1 signing is probably the event of the week."
    Optimism about the deal's expected signing boosted stocks on
Wall Street. Canada runs a current account deficit and is a
major exporter of commodities, including oil, so its economy
could benefit from an improved outlook for the global flow of
trade or capital.
    Canadian business concerns around trade tensions have
declined and sentiment is "broadly positive," the Bank of
Canada's quarterly business survey disclosed on Monday.
            
    The survey could encourage the central bank to leave
interest rates on hold at the Jan. 22 policy announcement
despite evidence in recent weeks of sluggish domestic economic
growth.
    "I don't see enough of a reason for the Bank of Canada to
get excited and change the monetary policy outlook," Bregar
said.               
    Chances of a rate cut by July are at less than 50%, money
market data showed.               
    The price of oil fell as Middle East tensions eased and
investors turned their focus to lackluster seasonal demand
following last week's bearish U.S. report showing large fuel
stock builds. U.S. crude oil futures        settled 1.6% lower
at $58.08 a barrel.                 
    The loonie declined 0.4% last week, after it notched a 5%
gain in 2019, when it was the top-performing G10 currency.
    Speculators have more than doubled their bullish bets on the
Canadian dollar, data from the U.S. Commodity Futures Trading
Commission and Reuters calculations showed on Friday. As of Jan.
7, net long positions had increased to 26,367 contracts from
11,913 in the prior week.
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year            down 2 Canadian cents
to yield 1.666% and the 10-year             falling 25 Canadian
cents to yield 1.615%. 

 (Reporting by Fergal Smith; Editing by David Gregorio and Peter
Cooney)
  
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