CANADA FX DEBT-Weak commodities undercut strong exports to keep C$ flat
* Canadian dollar ends at C$1.3188, or 75.83 U.S. cents * Bond prices lower across the maturity curve By Alastair Sharp TORONTO, Aug 5 (Reuters) - A fall in crude oil and other commodity prices and a rebound in U.S. yields pulled the Canadian dollar back to around an 11-year low against its U.S. counterpart on Wednesday, offsetting data that showed a sharp drop in the country's trade deficit in June. The currency had initially strengthened to near C$1.31 to the greenback after figures showed Canada's trade shortfall for June came in far narrower than analysts had expected due to strong export growth. "We got a lift on the better-than-expected trade data but then started to trade again with commodities and U.S. yields," said Matt Perrier, managing director of foreign exchange sales at BMO Capital Markets. Oil prices hit multi-month lows, aluminum hit a six-year nadir and copper and gold also fell on Wednesday, while U.S. bond yields rose. The Canadian dollar ended the day at C$1.3188 to the greenback, or 75.83 U.S. cents, just weaker than the Bank of Canada's official Tuesday close of C$1.3180, or 75.87 U.S. cents. Perrier said Canadian and U.S. jobs numbers for July on Friday could provide direction, with C$1.3333 (75 U.S. cents) seen as a psychologically important ceiling if the Canadian figures come in weak and the U.S. numbers strong. "The broader risks are still tilted towards a weaker Canadian dollar," he said. The cheaper Canadian currency - it hit its weakest level since 2004 this week - likely played a role in the jump in June exports. The stronger trade data was "very surprising and quite large in magnitude," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets. "It makes you wonder if we're finally getting some traction from the currency." The loonie's strongest level of the session was C$1.3110, while its weakest was C$1.3213. Canadian government bond prices were lower across the maturity curve, with the two-year price down 7 Canadian cents to yield 0.439 percent and the benchmark 10-year falling 38 Canadian cents to yield 1.468 percent. The Canada-U.S. two-year bond spread was -29.3 basis points, while the 10-year spread was -80.2 basis points. U.S. crude prices settled down 1.3 percent at $45.15 a barrel, while Brent crude slipped to $49.59. Oil is a major Canadian export. (Editing by Peter Galloway)
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