Article Highlights

  • Canadian dollar at C$1.2464, or 80.23 U.S. cents
  • Bond prices lower across much of a steeper yield curve
  • Canada-U.S. 10-year spread widens by 1.8 basis points
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The Canadian dollar weakened against its American counterpart on Thursday, after comments by U.S. President Donald Trump the day before appeared to validate concerns that the United States looks increasingly likely to pull out from NAFTA.

Trump said that terminating the North American Free Trade Agreement would result in the “best deal” to revamp the 24-year-old trade pact with Canada and Mexico in favor of U.S. interests.

The future of NAFTA future was the most significant downside risk cited by the Bank of Canada on Wednesday, in an otherwise bullish report on the outlook for Canada’s economic growth.

Canada sends about 75 percent of its exports to the United States.

The central bank on Wednesday raised its benchmark interest rate by 25 basis points to 1.25 percent, its highest since January 2009, after recent data showed stronger inflation and strong job growth.

But a report released on Thursday by ADP showed that Canada shed 7,100 jobs in December, driven by cuts in the manufacturing, education and trade sectors.

At 9:16 a.m. EST (1416 GMT), the Canadian dollar was trading at C$1.2464 to the greenback, or 80.23 U.S. cents, down 0.2 percent.

The currency traded in a range of C$1.2430 to C$1.2479. Lower prices of oil, one of Canada’s major exports, added to pressure on the loonie. U.S. crude prices were down 0.4 percent at $63.73 a barrel after a reported rise in American fuel supplies and expectations that OPEC-led efforts to boost prices by cutting output will increase supply from the United States and other rivals.

Canadian government bond prices were lower across much of a steeper yield curve in sympathy with U.S. Treasuries, with the 10-year falling 8 Canadian cents to yield 2.215 percent.

The gap between Canada’s 10-year yield and its U.S. equivalent widened by 1.8 basis points to a spread of -39.2 basis points, its widest since Jan. 3.