CANADA FX DEBT-C$ extends gains as oil offsets trade deficit hit
(Adds closing figures, strategist comment, details) * Canadian dollar ends at C$1.3027 or 76.76 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, Oct 6 (Reuters) - The Canadian dollar rallied against the greenback for the fifth-straight session on Tuesday, bolstered by a surge in crude oil prices that offset earlier losses on data that showed Canada's trade deficit widened in August as exports slumped. The price of crude, a significant Canadian export, surged on technical buying, a U.S. government forecast for tighter oil supplies next year and signs that the world's biggest crude producers may act jointly to support prices. U.S. crude settled at $48.53 a barrel, up $2.27, or 4.9 percent. "The driver today clearly has been oil. If you look at the trade data ... they weren't really that glorious," Amo Sahota, director at Klarity FX in San Francisco, said, adding that the soft data would not alter Bank of Canada interest rate expectations. "Expectations of a rate cut keep on diminishing to the point where it's negligible." Data showed exports fell by 3.6 percent, the largest decline since January 2012, as exports of energy products sank 14.7 percent. The slump, which follows two months of robust growth, pushed the country's trade deficit to C$2.53 billion, far off the C$1.2 billion economists had forecast. The loonie began recouping initial losses as market participants digested the details. Economists and analysts noted that the longer-term trends, particularly in terms of volume - a key measure for the Bank of Canada, remained "constructive." The Canadian dollar ended the session at C$1.3027 to the U.S. dollar, or 76.76 U.S. cents, stronger than the Bank of Canada's official close of C$1.3087, or 76.41 U.S. cents on Monday. The currency, which was weaker than most of its counterparts, traded between C$1.3026 and C$1.3134 during the session. It has rallied nearly 3 percent since softening to 11-year lows a week ago. In other data, the pace of purchasing activity in Canada slowed in September as a decline in the measure of prices offset gains in employment and inventories, according to Ivey Purchasing Managers Index data. The U.S. trade deficit for August also widened as exports took a hit, hurt by a softening global economy, news that could fuel expectations the Federal Reserve will push back any rate hike. Canadian government bond prices were mostly higher across the maturity curve. The two-year was flat to yield 0.508 percent, while the benchmark 10-year rose 21 Canadian cents to yield 1.421 percent. (Reporting by Solarina Ho Editing by W Simon and Dan Grebler)
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