CANADA FX DEBT-C$ weakens ahead of expected soft data as oil falls
(Adds analyst comments and details on NAFTA and Keystone XL; updates prices) * Canadian dollar ends at C$1.3407, or 74.59 U.S. cents * Bond prices mixed across the yield curve By Fergal Smith TORONTO, Dec 21 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday, paring most of the previous day's gains, as oil prices fell and investors braced for weak domestic economic data. Reports on Canadian inflation for November and retail sales for October are due on Thursday. The loonie lost ground "ahead of what is expected to be soft numbers," with a lack of liquidity in pre-Christmas trading adding to pressure on the currency, said Jack Spitz, managing director of foreign exchange at National Bank Financial. Economists forecast that total annual inflation will slip to 1.4 percent, while retail sales are expected to rise 0.2 percent after the previous month's 0.6 percent gain, in line with expectations that broader economic growth slowed in the fourth quarter. Oil, one of Canada's major exports, fell after Libya said it expects to boost production over the next few months and a report showed a surprise build in U.S. crude inventories last week. U.S. crude oil futures settled 81 cents lower at $52.49 a barrel. The Canadian dollar ended at C$1.3407 to the greenback, or 74.59 U.S. cents, weaker than Tuesday's close of C$1.3367, or 74.81 U.S. cents. In intraday trading on Tuesday, the loonie touched its weakest level since Oct. 1 at C$1.3434, pressured by the recent drop in Canadian yields below U.S. Treasuries. Political developments could become an important influence on the direction of the currency in 2017, including potential renegotiation of the North American Free Trade Agreement, Spitz said. Donald Trump's U.S. presidential election win last month has triggered uncertainty about the outlook for NAFTA, which economists say will discourage investment. A positive development for Canada's economy would be approval of TransCanada Corp's proposed Keystone XL pipeline to carry oil sands crude from Alberta to the U.S. Midwest. Canadian Prime Minister Justin Trudeau said Trump was "very supportive" of the pipeline in their first conversation after the U.S. election. The U.S. dollar retreated from a 14-year high against a basket of major currencies, giving back some of the gains chalked up since Trump's victory. Canadian government bond prices were mixed across the yield curve, with the two-year down 1 Canadian cent to yield 0.829 percent and the 30-year climbing 8 Canadian cents to yield 2.400 percent. Canada's non-farm payroll jobs declined by 33,600 in October after increasing 63,700 in the prior month, data from Statistics Canada showed. (Reporting by Fergal Smith; Editing by Lisa Von Ahn and Leslie Adler)
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