CANADA FX DEBT-C$ firms as June Fed rate hike expectations wane

Wed Jun 1, 2016 9:33am EDT
 
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* Canadian dollar at C$1.3067 or 76.53 U.S. cents
    * Bond prices higher across the maturity curve

    OTTAWA, June 1 (Reuters) - The Canadian dollar strengthened
against the greenback on Wednesday to end three consecutive
sessions of declines as investors tried to gauge if the Federal
Reserve will raise interest rates as early as June, which
weighed on the U.S. dollar.
    The loonie gained even as oil declined on expectations that
OPEC will shun any output curbs when the group meets on
Thursday. U.S. crude prices were down 1.73 percent to
$48.25 a barrel. 
    Soft figures on U.S. consumer confidence and regional
manufacturing on Tuesday eclipsed other stronger-than-expected
data and weighed on the greenback as investors rethought whether
the Fed will increase rates this summer.
    Markets see a 17.4 percent probability the Fed will move in
June. Reduced expectations are a detriment to the U.S. dollar
but benefit the Canadian dollar. 
    At 9:05 a.m. EDT (1305 GMT), the Canadian dollar 
was trading at C$1.3067 to the greenback, or 76.53 U.S. cents,
modestly stronger than the Bank of Canada's official close of
C$1.3110, or 76.28 U.S. cents.
    The currency's strongest level of the session was C$1.3043,
while its weakest level was C$1.3101.
    With little major domestic economic data on the calendar,
market attention will turn to trade data due on Friday.
Economists expect the trade deficit narrowed in April and will
be looking for a pick up in exports, which is key to the Bank of
Canada's outlook. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 4 Canadian
cents to yield 0.593 percent and the benchmark 10-year
 rising 22 Canadian cents to yield 1.297 percent.
    The Canada-U.S. two-year bond spread was -27.8 basis points,
while the 10-year spread was -51.4 basis points.

 (Reporting by Leah Schnurr; Editing by Meredith Mazzilli)