CANADA FX DEBT-C$ dips against weaker greenback as oil drops
* Canadian dollar at C$1.3499, or 74.08 U.S. cents * Bond prices higher across the maturity curve TORONTO, Nov 25 (Reuters) - The Canadian dollar weakened slightly against its U.S. counterpart on Friday as a drop in oil prices offset a pullback for the greenback against a basket of major currencies. Modest losses for the loonie came as Canada's 10-year yield fell 3.2 basis points below its U.S. equivalent to leave a spread of -79.9 basis points. On Wednesday, the spread hit its widest in 10 months at -81.9 basis points. A wider spread reduces investor incentive to buy lower-yielding Canadian bonds, trimming demand for Canadian dollars. U.S. crude prices were down 1.27 percent at $47.35 a barrel, pressured by uncertainty over whether OPEC will agree to cut production at the group's meeting next week. Oil is one of Canada's major exports. At 9:49 a.m. EDT (1449 GMT), the Canadian dollar was trading at C$1.3499 to the greenback, or 74.08 U.S. cents, slightly weaker than Thursday's close of C$1.3491, or 74.12 U.S. cents. The currency's strongest level of the session was C$1.3455, while its weakest was C$1.3515. The loonie last week hit its weakest in eight months at C$1.3589. The U.S. dollar on Friday pared some recent gains. Still, expectations of rises in U.S. inflation and interest rates have driven the greenback to a more than 6 percent gain against a basket of major currencies over October and November. The market is underestimating the prospect of further interest rate cuts from the Bank of Canada, some economists said, as an uncertain outlook for the NAFTA trade accord following Donald Trump's U.S. presidential election win risks derailing an expected pick-up in Canada's business spending. Canadian government bond prices were higher across a flatter yield curve, with the two-year up 2.5 Canadian cents to yield 0.673 percent and the benchmark 10-year rising 25 Canadian cents to yield 1.559 percent. On Wednesday, the 10-year yield touched its highest intraday level since December at 1.614 percent. Bond yields had been rising since the U.S. election as investors bet President-elect Trump will pursue inflation-boosting policies. (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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