CANADA FX DEBT-C$ gains despite oil fall, all eyes on U.S. jobs data
(Adds analyst comment, updates prices to close) * Canadian dollar settles at C$1.3086, or 76.42 U.S. cents * Bond prices higher across maturity curve By Alastair Sharp TORONTO, Sept 1 (Reuters) - The Canadian dollar made small gains against a broadly weaker U.S. counterpart on Thursday as oil prices slumped and an unexpected decline in U.S. manufacturing data cast some doubt on economic growth there ahead of a key jobs report on Friday. "The market is being pulled in many different directions today because it's the first trading day of the month, the U.S. jobs report is coming tomorrow, and oil is down another 3 percent," said Adam Button, currency analyst at ForexLive in Montreal. The U.S. dollar weakened as data showed U.S. factory activity contracted in August for the first time in six months as new orders and production tumbled. Investors are keenly attuned to data that could sway Federal Reserve policymakers considering whether to raise interest rates, possibly as soon as this month, with Friday's nonfarm payrolls offering a major new insight. Button said the loonie could weaken if the U.S. economy added at least 170,000 jobs in August. "That's a solid green light for the Federal Reserve," he said. The Canadian dollar settled at C$1.3086 to the greenback, or 76.42 U.S. cents, stronger than Wednesday's close of C$1.3116, or 76.24 U.S. cents. The currency's strongest level of the session was C$1.3083, while its weakest was C$1.3149, a three-week low. "There's some hidden Canadian dollar weakness there that's masked by a broader fall in the U.S. dollar," Button added. Oil prices fell more than 3 percent, heading for their sharpest weekly slide since January, as investors brushed aside talk that OPEC might freeze production and focused on a growing glut from U.S. crude stockpiles. "Ultimately the drop in oil will win out, but traders are afraid to dump the Canadian dollar until after the U.S. jobs report tomorrow," Button said. Data on Wednesday showed Canada's economy contracted in the second quarter by more than the Bank of Canada had projected. Canadian government bond prices were higher across the maturity curve, with the two-year bond up 3.5 Canadian cents to yield 0.563 percent and the benchmark 10-year adding 18 Canadian cents to yield 1.005 percent. Chinese and Canadian firms signed 56 deals worth more than C$1.2 billion ($914.8 million) on Thursday, Canadian trade minister Chrystia Freeland said in Shanghai. Austria said it plans to challenge a free trade deal with Canada because it sees it containing many of the same problems as one being negotiated with the United States. (Addiotional reporting by Fergal Smith; Editing by Meredith Mazzilli and Jonathan Oatis)
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