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Market News Canadian dollar steadies after hitting six-week low amid trade tensions

The Canadian dollar was little changed against its U.S. counterpart on Friday, with the currency recovering from an earlier six-week low which it hit as trade tensions escalated and after domestic data showed a drop in exports.

Canada posted a narrower trade surplus in June as exports fell by 5.1 per cent. It was the first drop for exports since February and reversed a big increase in May.

Canada exports many commodities, including oil, so its economy could be affected by an escalation of trade tensions. On Thursday, U.S. President Donald Trump said he would slap 10 per cent tariffs on $300-billion of Chinese imports starting Sept. 1.

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“For the most part I think the markets are digesting the latest trade salvo with regards to the tariffs,” said Mazen Issa, a senior FX strategist at TD Securities.

Speculators have cut their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of July 30, net long positions had fallen to 21,722 contracts after they reached the highest in the prior week since February 2018 at 30,750.

At 3:54 p.m. (1954 GMT), the Canadian dollar was trading nearly unchanged at 1.3210 to the greenback, or 75.70 U.S. cents. The currency, which fell by 0.3 per cent this week, hit its lowest intraday level since June 20 at 1.3265.

The loonie’s recovery from Friday’s low came as data showing a slower pace of U.S. employment growth and the U.S.-China trade tensions fuelled expectations that the Federal Reserve would cut interest rates again in September, pressuring the U.S. dollar.

Also supportive of the loonie, oil prices rebounded after recording their biggest daily drop in several years the day before. U.S. crude oil futures settled 3.2 per cent higher at $55.66 a barrel.

Canadian government bond prices were higher across the yield curve, with the two-year up 3.5 Canadian cents to yield 1.459 per cent and the 10-year rising 20 Canadian cents to yield 1.376 per cent.

The 10-year yield hit its lowest intraday level since November 2016 at 1.355 per cent.

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