Canadian dollar gains 0.1% against the greenback
Trades in a range of 1.3670 to 1.3707
Canada vows to hit NATO miiltary spending target this year
Canada-U.S. 10-year spread narrows by 3.3 basis points
TORONTO, June 9 (Reuters) – The Canadian dollar edged higher against its U.S. counterpart on Monday as Canada said it would pour extra billions into its armed forces, a move that some analysts say could ease the path to a trade deal with the United States.
The loonie was trading 0.1% higher at 1.3675 per U.S. dollar, or 73.13 U.S. cents, after trading in a range of 1.3670 to 1.3707. Last Thursday, the currency touched a near eight-month high at 1.3632.
“I see an abundance of signs that the U.S. and Canada are on the verge of making a trade deal,” said Adam Button, chief currency analyst at ForexLive.
“The news today is that Canada is going to meet its NATO target and I don’t think it’s a coincidence that that is one of the things that the U.S. is asking for.”
Canada’s Liberal government will hit NATO’s military spending target of 2% of GDP this fiscal year, five years earlier than promised, Prime Minister Mark Carney said.
Carney and U.S. President Donald Trump are in direct communication as part of Ottawa’s bid to persuade Washington to lift tariffs, Industry Minister Melanie Joly said last Thursday.
“We get a trade deal, we get more military spending, the jobs report wasn’t terrible – we might be closer to the end of the rate cutting cycle than was thought,” Button said.
Investors see a roughly 75% chance the Bank of Canada remains on hold at its next interest rate decision on July 30, up from 67% before stronger-than-expected domestic jobs data on Friday.
The U.S. dollar fell against a basket of major currencies, while the price of oil, one of Canada’s major exports, settled 1.1% higher at $65.29 a barrel.
Canadian bond yields were mixed across a steeper curve as investors worried that increased spending on defense could raise government borrowing.
The 10-year was up nearly one basis points at 3.349%, while the gap between it and the equivalent U.S. rate narrowed by 3.3 basis points to about 114 basis points in favor of the U.S. note. (Reporting by Fergal Smith; Editing by Alistair Bell)