August 31, 2018 / 1:26 PM / 2 months ago

CANADA FX DEBT-C$ weakens as NAFTA trade deal doubts emerge

    * Canadian dollar at C$1.3062, or 76.56 U.S. cents
    * Price of U.S. oil falls 0.5 percent
    * Bond prices higher across flatter yield curve
    * Canada's 10-year yield hits a five-week low at 2.219
percent

    TORONTO, Aug 31 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as doubts emerged that a
deal to revamp the NAFTA trade pact would be reached by the end
of the day.
    Canada and the United States will make a final push to iron
out differences on a pact to modernize the North American Free
Trade Agreement (NAFTA) by a Friday deadline set by President
Donald Trump, but the atmosphere soured late on Thursday
according to a media report.             
    Canadian officials expressed concern that a final NAFTA deal
would not be concluded on Friday, the Globe and Mail reported,
citing a source familiar with situation.             
    Canada sends about 75 percent of its exports to the United
States, so its economy could be hurt if a deal is not reached.
    On Thursday, data showed that the Canadian economy expanded
in the second quarter at the fastest pace in one year as exports
climbed, but the improved growth was not expected to trigger an
interest hike next week from the Bank of Canada.             
    Canadian producer prices declined by 0.2 percent in July
from June on lower prices for primary non-ferrous metal
products, Statistics Canada said on Friday.
    At 9:10 a.m. (1310 GMT), the Canadian dollar          was
trading 0.6 percent lower at C$1.3062 to the greenback, or 76.56
U.S. cents. The currency's strongest level of the session was
C$1.2978, while it touched its weakest since Monday at C$1.3064.
    The decline for the loonie came as stocks were pressured by
U.S. President Donald Trump's latest salvo in Washington's trade
war with China.             
    Canada runs a current account deficit and exports many
commodities so its economy could also be hurt if the global flow
of trade or capital slows.
    The price of oil, one of Canada's major exports, fell as
concerns over the impact of a trade war depressed sentiment.
U.S. crude        prices were down 0.50 percent at $69.90 a
barrel.                 
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year            up 6.5 Canadian cents
to yield 2.07 percent and the 10-year             rising 42
Canadian cents to yield 2.224 percent.
    The 10-year yield hit its lowest intraday since July 25 at
2.219 percent.

 (Reporting by Fergal Smith; Editing by David Gregorio)
  
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