Canadian dollar nudges lower as investors weigh NAFTA uncertainty

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar was marginally weaker against its U.S. counterpart on Thursday, pulling back from an earlier near two-week high as oil prices fell and investors weighed an uncertain outlook for the North American Free Trade Agreement.

Prospects of the United States introducing a sunset clause into the NAFTA agreement, which would kill it unless it was renegotiated every five years, had only a brief negative impact on the currency.

"Most of these proposals that are being exchanged are viewed by the market as just noise," said Andrew Kelvin, senior rates strategist at TD Securities. "The market won't react until it becomes apparent what if any the final agreement will be."

Prices of oil, one of Canada's major exports, slipped. The market was pressured by a bearish outlook by the International Energy Agency, which lowered its forecast for oil demand for 2018.

U.S. crude prices were down 1.4 percent at $50.60 a barrel.

At 4 p.m. (2000 GMT), the Canadian dollar was trading at C$1.2467 to the greenback, or 80.21 U.S. cents, down 0.1 percent.

The currency's weakest level of the session was C$1.2491, while it touched its strongest since Sept. 29 at C$1.2434.

Canadian home resale prices in September had their biggest fall in seven years, while new home prices were flat in August in the once red-hot markets of Toronto and Vancouver, adding to evidence that the country's housing boom continued to cool, data showed.

Canadian government bond prices were higher across the yield curve, with the two-year up 2.1 Canadian cents to yield 1.568 percent and the 10-year rising 23 Canadian cents to yield 2.084 percent.

(Reporting by Fergal Smith; Additional reporting by Solarina Ho; Editing by Susan Thomas and Peter Cooney)