CANADA FX DEBT-C$ gives up earlier gains on data as crude plunges

Tue Sep 1, 2015 4:57pm EDT
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(Updates with fresh commentary, closing figures)
    * Canadian dollar at C$1.3222, or 75.63 U.S. cents
    * Bond prices mostly higher across the maturity curve

    By Solarina Ho
    TORONTO, Sept 1 (Reuters) - The Canadian dollar gave up
data-fueled gains against the greenback on Tuesday, as crude
prices plunged on fresh anxiety over the impact of slowing
growth in China on the global economy.
    The latest economic numbers out of China indicated the
country's manufacturing sector shrank at its fastest pace in
three years and the services sector was also cooling. 
    The latest round of disappointing Chinese figures sowed
renewed fears about the world's second largest economy and one
of the biggest commodities consumers.  
    The report sent the price of oil, a key Canadian export,
plummeting some 8 percent. Prior to Tuesday, prices had rallied
roughly 25 percent over three sessions. 
    "Nobody is that confident on oil prices. It's still noisy
and there's still a lot of volatility," said Amo Sahota,
director at Klarity FX in San Francisco.
    The Canadian dollar finished at C$1.3222 to the
greenback, or 75.63 U.S. cents, not far from the Bank of
Canada's official close of C$1.3157, or 76.01 U.S. cents on
    The loonie traded between C$1.3116 and C$1.3233 during the
     The currency bounced earlier on data that showed Canada's
economy, hurt by falling crude prices over the past year,
contracted by an annualized 0.5 percent in the second quarter,
indicating a recession in the first half of the year.
    Economic activity in June grew by a better-than-expected 0.5
percent, however, the first monthly increase in six months,
which appeared to bode well for the third quarter. Economists
polled by Reuters forecast 0.2 percent growth.
    "Reading this morning's GDP data, I wondered, are analysts
looking at this glass half full or half empty?" said Sahota,
noting that some of the optimism over the June numbers could be
premature if gains were due to one-off factors.
    The volatility in August could also have a more detrimental
impact on the third quarter, he added.
    Canada's sluggish economy during the first half of 2015
prompted the Bank of Canada to cut interest rates twice by 25
basis points. Market participants are divided over whether the
Bank of Canada will stand pat or make another interest rate cut.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year price up 3
Canadian cents to yield 0.424 percent and the benchmark 10-year
 rising 57 Canadian cents to yield 1.431 percent.
    The Canada-U.S. two-year bond spread was -28.8 basis points,
while the 10-year spread was -72.9 basis points.

 (Editing by Jeffrey Benkoe; Editing by Leslie Adler)