CANADA FX DEBT-C$ pares gains as oil turns lower
(Adds analyst comments and details on RBC PMI, updates prices) * Canadian dollar ends at C$1.3102, or 76.32 U.S. cents * Bond prices lower across steeper maturity curve By Fergal Smith TORONTO, Aug 2 (Reuters) - The commodity-linked Canadian dollar pared gains against its U.S. counterpart on Tuesday as oil turned lower, while weaker-than-expected U.S. data last week weighed on the greenback. The U.S. dollar fell to a five-week low against a basket of major currencies. The greenback has been sold steadily since surprisingly weak U.S. second-quarter growth numbers last week. The boost from a weak U.S. dollar helped support oil early in the session. But U.S. crude oil futures settled down 55 cents at $39.51 a barrel as persistent worries of a glut weighed. "It looks like it (the Canadian dollar) was just really following the oil price," said Ian Gordon, FX strategist at Bank of America Merrill Lynch. The Canadian dollar ended at C$1.3102 to the greenback, or 76.32 U.S. cents, stronger than Monday's Reuters close of C$1.3120, or 76.22 U.S. cents. The loonie's official close on Friday before a civic holiday on Monday was C$1.3056, or 76.59 U.S. cents. The currency's strongest level of the session was C$1.3005, while its weakest was C$1.3143. Speculators increased bullish bets on the Canadian dollar for the fifth straight week, Commodity Futures Trading Commission data showed on Friday. Net long Canadian dollar positions rose to 23,180 contracts in the week ended July 26 from 22,068 contracts in the prior week. In contrast, Bank of America Merrill Lynch's proprietary data shows that non-leveraged accounts have reduced their exposure to the Canadian dollar, Gordon said. Canadian government bond prices were lower across a steeper maturity curve in sympathy with U.S. Treasuries. The two-year bond dipped 3.5 Canadian cents to yield 0.558 percent and the benchmark 10-year declined 47 Canadian cents to yield 1.077 percent. On Friday, the 10-year yield hit a two-week low at 1.023 percent. Losses for global bond markets came as Japan's cabinet approved a fiscal stimulus package on Tuesday to revive the country's flagging economy. Last week, the Bank of Japan announced further easing steps that disappointed investors. The RBC Canadian Manufacturing Purchasing Managers' Index (PMI), a measure of manufacturing business conditions, barely rose last month to a seasonally adjusted 51.9 from 51.8 in June. Canada's international trade data for June and employment report for July are awaited on Friday. (Reporting by Fergal Smith; Editing by Bernadette Baum and Dan Grebler)
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