CANADA FX DEBT-C$ gains on stronger dollar despite oil fall
(Adds currency trader comment, details; updates prices to close) * Canadian dollar settles at C$1.2917, or 77.42 U.S. cents * Bond prices higher across the maturity curve * 10-year yield touches lowest since Feb. 12 By Alastair Sharp TORONTO, June 30 (Reuters) - The Canadian dollar gained against a broadly stronger U.S. currency on Thursday, breaking from its typical connection with oil prices, as some investors saw value in its distance from tumult following Britain's vote to leave the European Union. The gain came despite falling prices for oil, a major Canadian export, and domestic data that showed the economy notching only modest growth after a recent run of losses. Currency markets were shaken by last week's so-called Brexit vote, and sterling and the euro lost ground again on Thursday after Bank of England Governor Mark Carney said he saw the need for more stimulus and a Bloomberg report hinted at more European Central Bank easing. "We're in the camp that thinks the Canadian dollar is a little bit of a safe haven, which is uncommon to say for a commodity currency," said Blake Jespersen, a managing director for foreign exchange sales at BMO Capital Markets. "Canada has very little trade with the UK and on a relative basis now our yields look OK." The Canadian dollar settled at C$1.2917 to the greenback, or 77.42 U.S. cents, stronger than Wednesday's close of C$1.2975, or 77.07 U.S. cents. Its strongest level was C$1.2914, while its weakest was C$1.3016. Jespersen said the currency will likely trade between C$1.27 and C$1.33 in the medium term as global uncertainties limit any strength and excessive weakening prompts short U.S. dollar positions. The Canadian economy grew by just 0.1 percent in April from March, Statistics Canada said. It matched analysts' expectations after two straight months of declines but cleared the way for a sickly second quarter on the back of the devastation caused by major Alberta wildfires. "It is quite easy to get a 1 to 2 percent contraction in the second quarter," said Derek Holt, head of capital markets economics at Scotiabank, which would be a much deeper contraction than the Bank of Canada has signaled. Canadian government bond prices were higher across the maturity curve, with the two-year price up 7.3 Canadian cents to yield 0.517 percent and the benchmark 10-year rising 65 Canadian cents to yield 1.060 percent. Canada's 10-year yield fell as low as 1.044 percent in the session, its lowest level since Feb. 12. Canada, the United States and Mexico on Wednesday mounted a fierce defense of free trade, vowing to deepen economic ties despite an increasingly acrimonious debate about the value of globalization. (Additional reporting by Fergal Smith; Editing by Bill Trott and James Dalgleish)
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