CANADA FX DEBT-C$ barely stronger as oil rally loses steam
(Adds broker comment, updates prices to close) * Canadian dollar settles at C$1.3276, or 75.28 U.S. cents * Bond prices lower across the yield curve By Alastair Sharp TORONTO, Dec 5 (Reuters) - The Canadian dollar strengthened slightly against its U.S. counterpart on Monday, adding to sharp gains from last week even as an oil price rally paused, with domestic attention shifting to an interest rate decision by the Bank of Canada. The currency hit its strongest level in more than six weeks in afternoon trade before trimming gains into the close as prices for oil, a major Canadian export, weakened. "A lot of people are surprised that the Canadian dollar has been as strong as it has been recently," said Steve Butler, director of foreign exchange trading at Scotiabank. "Obviously oil's made a good push higher through this $50 (a barrel) level and that's probably helping." U.S. crude futures strengthened on Monday before retreating in post-settlement trade as the market lost confidence that OPEC cuts would be sufficient to reduce oversupply given increased U.S. drilling. The loonie, as Canada's currency is colloquially known, is expected to weaker over the coming months as likely monetary policy divergence overshadows higher oil prices, a Reuters poll found. The Bank of Canada is widely expected to hold interest rates at 0.50 percent on Wednesday, with investors focused on the policy statement for any mention of how the U.S. election of Donald Trump could impact the Canadian and U.S. economies. The currency settled at C$1.3276 to the greenback, or 75.32 U.S. cents, slightly stronger than Friday's close of C$1.3283, or 75.28 U.S. cents. The currency's weakest level of the session was C$1.3356, while its touched its strongest since Oct. 21 at C$1.3236. The U.S. dollar weakened against a basket of major currencies as bets that a snap election in Italy would not be triggered supported the euro. The loonie advanced 1.8 percent last week, its biggest gain in eight months, helped by stronger-than-expected domestic data and by oil's surge following the OPEC deal to cut output. The Liberal government's new mortgage rules are likely to sober up Canada's housing market over the coming year, a Reuters poll showed, but record-low borrowing costs should bolster demand. Canadian government bond prices were lower across the yield curve, with the two-year down 1.5 Canadian cents to yield 0.741 percent and the benchmark 10-year slipping 8 Canadian cents to yield 1.628 percent. On Thursday, the 10-year yield touched its highest in more than one year at 1.712 percent. (Additional reporting by Fergal Smith; Editing by Nick Zieminski and Meredith Mazzilli)
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