December 2, 2019 / 9:05 PM / 9 days ago

CANADA FX DEBT-Canadian dollar lags G10 peers as global trade concerns rise

 (Adds strategist quote and details on activity; updates prices)
    * Canadian dollar weakens 0.1% against the greenback
    * Canadian manufacturing activity expands in November 
    * Price of U.S. oil increases by 1.5%
    * Canada's 10-year yield touches a near three-week high at
1.566%

    By Fergal Smith
    TORONTO, Dec 2 (Reuters) - The Canadian dollar weakened on
Monday against its U.S. counterpart and every other G10
currency, as investors worried about a potential escalation of
global trade conflicts and awaited a Bank of Canada interest
rate decision this week.
    Global stock markets         , which had been counting on a
"phase one" trade deal this year between the United States and
China, fell after U.S. President Donald Trump said he would
restore tariffs on some imports from Brazil and Argentina. A
drop in new U.S. factory orders in November to their lowest
since 2012 deepened the decline.             
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so its economy could be
hurt by a reduced flow of global capital or trade.
    "The concern is how the external climate filters into the
domestic economy and that's why the Canadian dollar is on the
back foot," said Simon Harvey, FX market analyst for Monex
Europe and Monex Canada.
    The Bank of Canada, which is expected on Wednesday to leave
its benchmark interest rate at 1.75%, has expressed concern
about global trade uncertainty. The loonie has been pressured
since October by a more dovish stance from the central bank.
    At 3:20 p.m. (2020 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3295 to the greenback, or 75.22 U.S.
cents. It lost greater ground against all the other G10
currencies.
    The loonie, which fell 0.9% in November, traded in a range
of 1.3275 to 1.3307. The currency underperformed its peers on
Monday despite higher oil prices and improved domestic data.
    Canadian manufacturing activity expanded in November for the
third consecutive month as production climbed at a faster pace
and new orders continued to grow, but the momentum was subdued
compared with historical levels, data showed.             
    The price of oil, one of Canada's major exports, was
supported by hints that OPEC and its allies may agree to deepen
output cuts at a meeting this week and as rising manufacturing
activity in China suggested stronger demand.                    
    U.S. crude oil futures        were up 1.5% at $56.01 a
barrel.
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
           fell 5 Canadian cents to yield 1.613% and the 10-year
            was down 68 Canadian cents to yield 1.536%.
    The 10-year yield touched its highest intraday since Nov. 13
at 1.566%.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter
Cooney)
  
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