CANADA FX DEBT-C$ weakens as oil falls, Brexit risk weighs

Wed Jun 22, 2016 5:02pm EDT
 
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(Adds analyst quote, updates prices)
    * Canadian dollar ends at C$1.2839, or 77.89 U.S. cents
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, June 22 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday, pulling back from an
earlier 12-day high as oil fell and a new poll added to investor
caution ahead of a British referendum on the country's
membership in the European Union. 
    U.S. crude oil futures settled 72 cents lower at $49.13 a
barrel as a smaller-than-expected U.S. inventory drawdown and
jitters ahead of the so-called Brexit vote on Thursday weighed.
 
    "We would expect that the outcome of that vote could
significantly influence foreign exchange markets, at least in
the near term," said Eric Viloria, a currency strategist at
Wells Fargo, who noted that Canada's commodity-linked currency
will be sensitive to shifts in sentiment ahead of the
referendum.
    The campaign for Britain to leave the European Union holds a
one-point lead over the "In" camp, according to a survey
published by polling firm Opinium.    
    The loonie would weaken and the chances that the Canadian
central bank cuts interest rates would jump if Britain votes to
leave the European Union, strategists warn, noting the result
could hit global growth and spell bad news for
commodity-exporting countries. 
    The Canadian dollar ended at C$1.2839 to the
greenback, or 77.89 U.S. cents, weaker than Tuesday's close of
C$1.2811, or 78.06 U.S. cents.
    The currency's weakest level of the session was C$1.2853,
while it touched its strongest since June 10 at C$1.2743.    
    Domestic retail sales data helped support the Canadian
dollar earlier in the session. Retail sales rose by 0.9 percent
in April from March to hit a record C$44.28 billion ($34.59
billion), thanks largely to higher sales at gasoline stations.
 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 2 Canadian
cents to yield 0.598 percent and the benchmark 10-year
 rising 19 Canadian cents to yield 1.232 percent.
    On Tuesday, the 10-year yield touched its highest level in
nearly three weeks at 1.255 percent.

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn and Leslie
Adler)