CANADA FX DEBT-C$ weakens against firmer greenback as oil falls

Wed Aug 24, 2016 4:59pm EDT
 
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* Canadian dollar ended at C$1.2930, or 77.34 U.S. cents
    * Bond prices lower across the maturity curve

    By Fergal Smith
    TORONTO, Aug 24 (Reuters) - The commodity-linked Canadian
dollar weakened against its firmer U.S. counterpart on Wednesday
as oil fell, although losses for the currency were restrained as
investors awaited clues this week on the U.S. interest rate
outlook.
    Oil fell after an unexpectedly large inventory build in the
world's biggest oil consumer renewed oversupply concerns. U.S.
crude oil futures settled $1.33 lower at $46.77 a 
barrel. 
    The U.S. dollar rose against a basket of major
currencies ahead of a gathering of global central bankers later
this week in Jackson Hole, Wyoming, where the focus will be on
Friday's keynote speech by Federal Reserve Chair Janet Yellen.
 
    "The market is really sitting tight waiting for Friday (when
Yellen speaks)," said Don Mikolich, executive director, foreign
exchange sales at CIBC Capital Markets, who noted that the
loonie lost only a modest amount of ground in the face of losses
for oil and a firmer U.S. dollar.
    "Canada still stands out as a positive performer when you
look at the alternatives," Mikolich added.
    Many major central banks have cut their policy interest
rates to near or below zero.
    Better-than-expected earnings from domestic banks over the
past two days have been a "positive sign" for foreign investors
that are searching for yield, said Mikolich.
    The Canadian dollar ended at C$1.2930 to the
greenback, or 77.34 U.S. cents, slightly weaker than Tuesday's
close of C$1.2910, or 77.46 U.S. cents.
    The currency's strongest level of the session was C$1.2902,
while its weakest was C$1.2958.
    On Monday, the loonie touched its weakest in one week at
C$1.2965.
    Canadian government bond prices were lower across the
maturity curve, with the two-year bond down 3
Canadian cents to yield 0.573 percent and the benchmark 10-year
 falling 14 Canadian cents to yield 1.038 percent.
    The curve flattened very slightly as the spread between the
2-year and 10-year yields narrowed by 0.1 of a basis point to
46.5 basis points.
    It was the narrowest spread since June 2008 as longer-dated
maturities extended recent outperformance.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and
Meredith Mazzilli)