CANADA FX DEBT-C$ posts 3-week high as oil rises, greenback slides
(Adds analyst quote, details on trade minister's comments, background, updates prices) * Canadian dollar ends at C$1.3242, or 75.52 U.S. cents * Loonie touches its strongest since Dec. 14 at C$1.3192. * Bond prices higher across the yield curve By Fergal Smith TORONTO, Jan 5 (Reuters) - The Canadian dollar strengthened to a three-week high against its U.S. counterpart on Thursday as oil prices rose and the greenback lost ground against a basket of major currencies. The U.S. dollar fell to a three-week low after U.S. inflation and unemployment data failed to reverse a downtrend that followed some of the biggest gains on record for China's yuan. Prices of oil, one of Canada's major exports, were lifted by news that Saudi Arabia had cut production to meet OPEC's agreement to reduce output. U.S. crude prices settled 50 cents higher at $53.76 a barrel. "This latest bout of Canadian dollar strength has everything to do with oil and not enough to do with the softness that we have seen in domestic data," said Bipan Rai, senior macro strategist at CIBC Capital Markets. Recent data showed that Canada's economy contracted in October and that the Bank of Canada's new measures of core inflation declined in November. The Canadian dollar ended at C$1.3242 to the greenback, or 75.52 U.S. cents, stronger than Wednesday's close of C$1.3308, or 75.14 U.S. cents. The currency's weakest level of the session was C$1.3312, while it touched its strongest since Dec. 14 at C$1.3192. The move follows a 3 percent gain for the currency in 2016, its first annual advance since 2012, as oil rebounded from its February trough. There is no question of separating the Canadian and U.S. economies, Canadian Trade Minister Chrystia Freeland said when asked about the potential impact of a Donald Trump presidency. Canadian government bond prices were higher across the yield curve, with the two-year up 6.5 Canadian cents to yield 0.72 percent and the 10-year rising 38 Canadian cents to yield 1.666 percent. The gap between Canada's 10-year yield and its U.S. equivalent narrowed by 5.6 basis points to -68.5 basis points, as U.S. Treasuries outperformed amid uncertainty about the incoming Trump administration. Canadian producer prices rose 0.3 percent in November from October on higher prices for motorized and recreational vehicles and primary non-ferrous metal products. Canada's trade report for November and employment report for December are due on Friday. (Reporting by Fergal Smith; Editing by Meredith Mazzilli and James Dalgleish)
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