C$ weakens as oil prices fall, greenback climbs


16/02/2017 07:35 AST

The Canadian dollar weakened against its US counterpart on Wednesday as a drop in oil prices and broader gains for the greenback offset stronger-than-expected domestic manufacturing data.

Canadian manufacturing sales jumped for the second month in a row in December as firms sold higher amounts of transportation equipment and petroleum products at the end of the year, data from Statistics Canada showed.

The 2.3 percent increase exceeded economists' expectations for a gain of 0.2 percent, while volumes also rose 2.3 percent.

The US dollar padded its gains against a basket of major currencies on stronger-than-expected inflation and retail sales data, with a hawkish tone from Federal Reserve Chair Janet Yellen one day before also underpinning the greenback. US crude prices were down 0.1 percent at $53.17 a barrel as an industry report showing a large rise in US crude inventories signaled ample supply. Oil is one of Canada's major exports.

At 9:26 a.m. EST (1426 GMT), the Canadian dollar traded at C$1.3106 to the greenback, or 76.30 US cents, weaker than Tuesday's close of C$1.3071, or 76.51 US cents. The currency traded in a range of C$1.3066 to C$1.3120. The loonie got a boost on Monday after US President Donald Trump said he only wants to tweak trade ties with Canada.

Still, Trump's pledge to renegotiate the North American Free Trade Agreement (NAFTA) to focus on Mexico is almost impossible and Canada will not emerge unscathed, Canadian officials and trade experts said.

Canada sends 75 percent of its exports to the United States. A proposed US border adjustment tax would reduce Canada's real gross domestic product by almost 1 percent, the C.D. Howe Institute said in a research report on Tuesday. In other domestic data, resales of Canadian homes fell 1.3 percent in January from December, a report from the Canadian Real Estate Association showed.

Canadian government bond prices were lower across a steeper yield curve in sympathy with US Treasuries on the firm economic data. The two-year dipped 2.5 Canadian cents to yield 0.812 percent, and the 10-year declined 27 Canadian cents to yield 1.797 percent. The 10-year yield touched its highest intraday since Feb. 1 at 1.801 percent.

The European Union and Canada secured clearance on Wednesday for their contentious free trade deal and the removal of import duties.

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