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CANADA FX DEBT-C$ pulls back from multi-year high ahead of 'event risk'

Fergal Smith
·2 min read

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar weakens 0.4% against the greenback * IHS Markit Canada manufacturing PMI rises to 57.9 in December * Loonie touches its strongest since April 2018 at 1.2665 * Canadian bond yields trade mixed across the curve By Fergal Smith TORONTO, Jan 4 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday, reversing from a near three-year high earlier in the day, as the uncertain outcome of U.S. Senate runoff elections in Georgia this week spooked investors. The loonie was trading down 0.4% at 1.2772 to the greenback, or 78.30 U.S. cents. The currency touched its strongest intraday level since April 2018 at 1.2665 before turning lower. It notched a 2% gain in the year just ended. "The risk-off move in U.S. equities got people wrong-footed," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, adding the risk-off tone is likely "related to event risk over the next several days." Wall Street's main indexes fell and the price of oil, one of Canada's main exports, settled 1.9% lower at $47.62 a barrel. Tuesday's twin races in the battleground state of Georgia will determine control of the U.S. Senate. "If that equity move reverses over the next 72 hours, so will the dollar-CAD move," Anderson said. Canadian factory activity expanded at its fastest pace on record in December as new orders and production climbed. The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) rose to a seasonally adjusted 57.9 in December from 55.8 in November. A number of Canadian provinces have announced tighter economic restrictions as a second wave of the coronavirus sweeps across Canada. Still, the PMI showed manufacturers growing more optimistic that output would continue to rise in 2021. Canada's employment report for December is due on Friday. Canadian government bond yields were mixed across the curve, with the 10-year little changed at 0.676%. (Reporting by Fergal Smith; Editing by Emelia Sithole-Matarise and Peter Cooney)