CANADA FX DEBT-C$ strengthens to a 7-week high as oil rallies
(Adds analyst quotes and details, updates prices) * Canadian dollar ends at C$1.3191, or 75.81 U.S. cents * Loonie touches its strongest since Oct. 20 at C$1.3184 * Bond prices lower across steeper yield curve By Fergal Smith TORONTO, Dec 8 (Reuters) - The Canadian dollar strengthened to a seven-week high against its U.S. counterpart on Thursday, as higher oil prices offset broader gains for the greenback after the European Central Bank's monetary policy decisions. Gains for the loonie came despite the Bank of Canada on Wednesday pointing to a "significant" amount of slack in the Canadian economy as it held interest rates steady. "Right now, this is not a market that is very bearish on Canada ... even though Canada is still mired with great difficulties and long-term prospects look rather dim," said Jimmy Jean, senior economist at Desjardins. Optimism that U.S. economic stimulus will boost Canada's exports has offset the threat of protectionism, with the market "not properly integrating the negatives for Canada," Jean said. Donald Trump's U.S. presidential election win has triggered uncertainty about the outlook for the North American Free Trade Agreement, which economists say will discourage investment. The Canadian dollar ended at C$1.3191 to the greenback, or 75.81 U.S. cents, stronger than Wednesday's close of C$1.3237, or 75.55 U.S. cents. The currency's weakest level of the session was C$1.3251, while it touched its strongest since Oct. 20 at C$1.3184. Higher prices for oil, one of Canada's major exports, have helped support the loonie after last week's output cut agreement by members of the Organization of the Petroleum Exporting Countries. U.S. crude oil futures settled up $1.07 at $50.84 a barrel on growing optimism that non-OPEC producers might also agree to cut output. The U.S. dollar rose against a basket of major currencies, including the euro, as the ECB extended its asset purchase programme at a reduced level and introduced measures allowing it to buy more short-dated bonds. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries and German government bonds. The two-year fell 3 Canadian cents to yield 0.719 percent and the benchmark 10-year declined 58 Canadian cents to yield 1.662 percent. Canada's housing market showed some signs of softening in November as new construction starts fell, but separate data showed prices rose in October and permits for future building jumped, suggesting the market could have strength in reserve. (Reporting by Fergal Smith; Editing by Tom Brown)
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