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CANADA FX DEBT-Canadian dollar falls as higher bond yields spook investors

Fergal Smith
·2 min read
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(Adds strategist quotes and details throughout; updates prices) * Canadian dollar weakens 0.3% against the greenback * Loonie touches its strongest intraday since Jan. 21 at1.2610 * Price of U.S. oil settles nearly 1% higher * Canadian bond yields rise across a steeper curve By Fergal Smith TORONTO, Feb 16 (Reuters) - The Canadian dollar weakenedagainst its U.S. counterpart on Tuesday as a jump in U.S.Treasury yields weighed on risk appetite, with the looniepulling back from its strongest level in nearly four weeksearlier in the session. The loonie was trading 0.3% lower at 1.2680 to thegreenback, or 78.86 U.S. cents. The currency touched itsstrongest intraday level since Jan. 21 at 1.2610. "The Canadian dollar is lower because rising U.S. yieldsfinally hit the stock market today," said Erik Bregar, head ofFX strategy at Exchange Bank of Canada. "The loonie is stillcorrelated very nicely with broader risk sentiment." The 10-year U.S. Treasury yield, a benchmark for long-termborrowing costs, traded above 1.3% for the first time in nearlyone year, while the S&P 500 pulled back from an earlier recordintraday high. Canada runs a current account deficit and is a majorproducer of commodities, including oil, so the loonie tends tobe sensitive to the global flow of trade and capital. U.S. crude oil futures settled nearly 1% higher at$60.05 a barrel after a deep freeze in the U.S. South that shutwells and oil refineries in Texas. Canadian home sales rose 2.0% in January from December,setting a new record amid strong demand in markets across thecountry, the Canadian Real Estate Association said. Canada's inflation report for January is due on Wednesdaywhich could help guide expectations for the Bank of Canadapolicy outlook. Canadian government bond yields were higher across a steepercurve in sympathy with U.S. Treasuries. The 10-year rose 8.8 basis points to 1.122%, its highest since March lastyear. Canada must justify its planned C$100 billion post-pandemicstimulus plan before committing to significant new spending andshould commit to a clear fiscal anchor, the InternationalMonetary Fund said. (Reporting by Fergal Smith; Editing by Andrea Ricci andAlistair Bell)