CANADA FX DEBT-C$ weaker as oil falls, risk aversion picks up
(Adds strategist comment, updates prices to close) * Canadian dollar at C$1.2807, or 78.08 U.S. cents * Bond prices higher across the maturity curve By Alastair Sharp TORONTO, June 13 (Reuters) - The Canadian dollar weakened to a nearly one-week low against its U.S. counterpart on Monday as oil eased and risk appetite deteriorated amid fears that Britons may vote to leave the European Union. The Canadian currency settled at C$1.2807 to the greenback, or 78.08 U.S. cents, weaker than Friday's close of C$1.2757, or 78.39 U.S. cents. Shaun Osborne, chief currency strategist at Bank of Nova Scotia, said he expects the loonie to depreciate to between C$1.33 and C$1.35 against the greenback in the next three months. "I can see some challenges for Canada over the next little while," he said. "With the Fed in play, it's going to be a challenge for the Canadian dollar to really pick up any substantial ground over the balance of the year." Osborne said that view included an assumption that crude may have peaked for now and could ease back toward the low $40s per barrel. Oil prices were weighed downward by the stronger U.S. dollar and gloomy economic prospects in Europe and Asia. U.S. crude prices settled down 0.4 percent at $48.88 a barrel. Global stocks sold off on Monday, adding to headwinds for the risk-sensitive and commodity-linked Canadian dollar, after betting odds showed the probability that Britain would vote to leave the EU had increased sharply to 36 percent, the highest level since the June 23 referendum was announced four months ago. The Canadian currency's strongest level of the session was C$1.2750, while it touched its weakest level since June 7 at C$1.2827. Last week, the loonie gained 1.4 percent as expectations fell for interest rate hikes from the U.S. Federal Reserve and as oil posted fresh 2016 highs above $50. Data on Friday showed that Canada added far more jobs than expected in May as hiring picked up in the construction and manufacturing sectors. Speculators have cut bullish bets on the loonie, Commodity Futures Trading Commission data showed on Friday. Net long Canadian dollar positions fell to 21,537 contracts in the week ended June 7 from 26,259 contracts in the prior week, which was the largest net long position since February 2013. Canadian government bond prices were higher across the maturity curve, with the two-year price up 2.5 Canadian cents to yield 0.488 percent and the benchmark 10-year climbing 19 Canadian cents to yield 1.112 percent. The 10-year yield hit its lowest level since Feb. 24 at 1.107 percent. (Reporting by Fergal Smith, editing by G Crosse)
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