October 1, 2018 / 8:57 PM / in 2 months

CANADA FX DEBT-C$ notches 4-month high on NAFTA trade deal, soaring oil prices

 (Adds strategist quotes, details on activity; updates prices)
    * Canadian dollar climbs 0.8 percent against the greenback
    * Canada reaches deal with United States to revamp NAFTA
    * Price of U.S. oil rises 2.8 percent
    * Canada's 10-year yield touches 4-month high at 2.519
percent 

    By Fergal Smith
    TORONTO, Oct 1 (Reuters) - The Canadian dollar strengthened
to a four-month high against its U.S. counterpart on Monday,
boosted by a last-minute deal to salvage the trilateral NAFTA
trade pact and a jump in crude oil prices.
    The new United States-Mexico-Canada Agreement (USMCA)
largely leaves the broad North American Free Trade Agreement
intact and maintains supply chains that would have been
fractured under weaker bilateral deals.             
    Investors are raising bets for as many as four additional
interest rate increases from the Bank of Canada by the end of
2019 after the trade deal reduced uncertainty for Canada's
trade-dependent economy.             
    "It is a really good day for the loonie," said Colin
Cieszynski, chief market strategist at SIA Wealth Management.
"The trade agreement got settled and we are getting a boost from
the oil price."
    The price of oil, one of Canada's major exports, rose to
levels not seen since November 2014 as U.S. sanctions on Iran
loom and a NAFTA deal fosters growth. U.S. crude oil futures
       settled 2.8 percent higher at $75.30 a barrel.
            
    At 4:16 p.m. (2016 GMT), the Canadian dollar          was
trading 0.8 percent higher at 1.2805 to the greenback, or 78.09
U.S. cents.
    The currency, which notched on Friday its biggest gain in
four months, touched its strongest level since May 22 at 1.2783.
    The break below 1.2900 was "very encouraging" for loonie
bulls and opened the door to further gains for the currency,
Cieszynski said.
    Gains for the loonie came despite data showing that Canada's
manufacturing sector expanded in September at its slowest pace
this year as the rise of production volumes decelerated and
growth in new business was held back by global trade frictions.
                             
    Canada's jobs data for September and August trade data are
due on Friday.    
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 13 Canadian cents to
yield 2.288 percent and the 10-year             falling 69
Canadian cents to yield 2.51 percent.
    The 10-year yield touched its highest intraday since May 18
at 2.519 percent.

 (Reporting by Fergal Smith; Editing by Susan Thomas and Peter
Cooney)
  
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