CANADA FX DEBT-C$ ends unchanged despite oil price rally
(Adds strategist comment, details; updates prices) * Canadian dollar unchanged at C$1.3738 or 72.79 U.S. cents * Bond prices lower across the maturity curve By Fergal Smith TORONTO, Dec 15 (Reuters) - The Canadian dollar ended unchanged against the U.S. dollar on Tuesday despite a rally in crude oil prices, as the likely start of Federal Reserve rate hikes on Wednesday supported the greenback and weak manufacturing data weighed on Canada's outlook. "We did have disappointing manufacturing sales today. We also had markets positioning for the FOMC tomorrow," said Bipan Rai, director of foreign exchange strategy at CIBC Capital Markets, referring to the Fed's policy-setting committee. Bank of Canada Governor Stephen Poloz signaled clearly to markets not to expect him to match potential Fed rate hikes. Underlying U.S. inflation pressures rose in November, which could give the Federal Reserve more ammunition to raise interest rates on Wednesday. Canadian manufacturing sales fell 1.1 percent in October, the third straight monthly fall. That was well below the 0.5 percent drop expected in a Reuters poll. U.S. crude prices settled at $37.35 a barrel, up 2.9 percent, while Brent crude added 0.3 percent to $38.04 The Canadian dollar settled at C$1.3738 to the U.S. dollar, or 72.79 U.S. cents, matching the Bank of Canada's official close on Monday. The currency's strongest level of the session was C$1.3674, while its weakest was C$1.3766. After a "choppy session," volatility is expected to remain elevated into Wednesday's Fed decision, according to Rai. Against the euro, the Canadian dollar rebounded to C$1.5013 . On Monday, the currency hit its weakest level against the euro since Aug. 26 at C$1.5201. In other domestic data, sales of existing homes rose 1.8 percent in November and commercial borrowing by small businesses climbed in October. Canadian government bond prices were lower across the maturity curve in sympathy with U.S. Treasuries. The two-year price was down 2.5 Canadian cents to yield 0.52 percent and the benchmark 10-year fell 16 Canadian cents to yield 1.49 percent. The Canada-U.S. 10-year spread was 2.8 basis points wider at -78.1 basis points, trading at its deepest negative level in nearly four months, as Treasuries underperformed. Vulnerabilities in Canada's housing sector have edged higher since June, but capital reforms and last week's government measures to cool the sector mean the financial system is better able to handle any troubles that may arise, the Bank of Canada said. (Reporting by Fergal Smith; Editing by James Dalgleish)
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