CANADA FX DEBT-C$ hits 1-week low as oil falls on Brexit risk

Wed Jun 15, 2016 5:14pm EDT
 
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* Canadian dollar ended at C$1.2926, or 77.36 U.S. cents
    * The loonie touched its weakest since June 6 at C$1.2943
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, June 15 (Reuters) - The Canadian dollar weakened to
a new one-week low against its U.S. counterpart on Wednesday as
oil prices fell, but losses were limited by reduced bets for
U.S. interest rate hikes and stronger-than-expected domestic
manufacturing data.
    Oil fell for the fifth straight session on mounting concerns
about Britain's possible exit from the European Union. A
referendum on the so-called Brexit will be held on June 23.
 
    U.S. crude prices settled down 48 cents at $48.01 a
barrel. 
    "To the extent that Brexit leads to severe financial market
gyrations and global risk aversion, near-term prospects for the
U.S. and global economies would be dimmed," said Derek Burleton,
deputy chief economist at Toronto-Dominion Bank.
    In that scenario, the Canadian dollar would likely fall in
tandem with commodity prices, he added.
    The Canadian dollar closed at C$1.2926 to the
greenback, or 77.36 U.S. cents, weaker than Tuesday's close of
C$1.2853, or 77.80 U.S. cents.
    The currency's strongest level of the session was C$1.2827.
It traded as low as C$1.2943 for the first time since June 6.
    The U.S. Federal Reserve on Wednesday signaled that it still
planned two rate increases this year, but indicated it would be
less aggressive in tightening monetary policy after the year
ends. 
    The CME Group's FedWatch tool showed a 9.5 percent
probability of a rate hike in July compared with 21 percent
before the Fed ended its two-day policy meeting on Wednesday.
    Canadian factory sales rebounded in April, rising by a
higher-than-expected 1.0 percent from March, after declining for
two consecutive months. 
    Sales of existing Canadian homes fell 2.8 percent in May
from a record high in April, while borrowing activity by
Canadian small businesses fell for the fifth consecutive month
in April.  
    Canadian government bond prices rose across the maturity
curve in sympathy with Treasuries. The two-year price
rose 3.5 Canadian cents to yield 0.478 percent and the benchmark
10-year climbed 34 Canadian cents to yield 1.083
percent.
    The Canada-U.S. two-year bond spread moved by 3.2 basis
points to -19.3 basis points, its smallest gap since May 12, as
Treasuries outperformed.
    Bank of Canada Governor Stephen Poloz will give a speech
titled "The Canadian Economy: A Progress Report" on Wednesday
night and then hold a press conference. His remarks will be
published on the central bank's website at 7:40 p.m. EDT (2340
GMT).
    The Bank of Canada said last month the impact of the
wildfires in Alberta could take 1.25 percentage points off
growth in the second quarter.

 (Reporting by Fergal Smith; Editing by W Simon and Richard
Chang)