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Canadian dollar weakens as U.S.-North Korea tension weighs on risk appetite

The loonie touched on Monday its weakest in three weeks at $1.2715.

Jeff McIntyre/CP

The Canadian dollar weakened against on Wednesday its U.S. counterpart as worries about increased U.S.-North Korea tension weighed, offsetting higher oil prices and stronger-than-expected domestic housing data.

President Donald Trump's warning that North Korea faced "fire and fury," and Pyongyang's threat of possible retaliation, drove investors out of stocks and into the yen, Swiss franc, gold and government debt.

Commodity-linked currencies, such as the Canadian dollar, which are sensitive to global trade, also lost ground.

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At 9:08 a.m. ET, the Canadian dollar was trading at $1.2693 to the greenback, or 78.78 U.S. cents, down 0.2 per cent.

The currency traded in a range of $1.2666 to $1.2708. It touched on Monday its weakest in three weeks at $1.2715.

Canadian housing starts rose in July to a seasonally-adjusted annual rate of 222,324 from June's upwardly revised 212,948, data from the Canada Mortgage and Housing Corporation showed. Economists had expected a 205,000 annual rate.

The value of Canadian building permits unexpectedly rose in June, up 2.5 per cent, on increased plans for commercial buildings, separate data from Statistics Canada showed.

U.S. crude prices were up 0.92 per cent at $49.62 a barrel ahead of a U.S. inventory report, which is expected to show crude stocks dropped for a sixth week. Oil is one of Canada's major exports.

A U.S. proposal for Mexico and Canada to vastly raise the value of online purchases that can be imported duty-free from stores like Amazon.com and eBay is emerging as a flashpoint in an upcoming renegotiation of the NAFTA trade deal.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries as investors bought safe-haven assets. The two-year rose 5 Canadian cents to yield 1.231 per cent and the 10-year climbed 46 Canadian cents to yield 1.881 per cent.

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The gap between the 2-year yield and the 10-year yield narrowed by 2.8 basis points to a spread of 65 basis points, its narrowest since July 24, as longer-dated bonds outperformed.

Video: Carrick Talks Money: What's the best interest rate I can get for my savings? (The Globe and Mail)
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