CANADA FX DEBT-C$ weakens to 1-week low, but losses pared as oil bounces

Thu Mar 24, 2016 4:27pm EDT
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* Canadian dollar ends at C$1.3240, or 75.53 U.S. cents
    * Currency touches its weakest since March 16 at C$1.3296
    * Bond prices lower across steeper maturity curve

    By Fergal Smith
    TORONTO, March 24 (Reuters) - The Canadian dollar weakened
to a fresh one-week low against its U.S. counterpart on
Thursday, pressured by lower oil prices and Federal Reserve rate
hike speculation, but losses were trimmed ahead of the Good
Friday holiday.
    The currency has weakened 2.4 percent since last week
touching its strongest in nearly five months.
    The pullback in crude oil prices, hawkish comments from Fed
policymakers and corporate takeover activity have been headwinds
this week, according to Don Mikolich, executive director,
foreign exchange sales at CIBC Capital Markets.
    Corporate accounts have been "more active," selling Canadian
dollars on the move lower for the currency on the expectation
that it may weaken still further in the near-term, he added.    
    U.S. crude prices were down 0.48 percent to $39.60 a
barrel, although paring much of the day's losses after a renewed
drop in the U.S. oil rig count offset weaker sentiment caused by
record high U.S. crude stockpiles. 
    The greenback climbed for a fifth consecutive day
against a basket of major currencies as investors moved to price
in the possibility of two U.S. rate hikes this year.
    However, a drop in shipments of U.S. core capital goods
could prompt economists to trim U.S. first-quarter GDP growth
    The Canadian dollar closed at C$1.3240 to the
greenback, or 75.53 U.S. cents, weaker than Wednesday's close of
C$1.3214, or 75.68 U.S. cents.
    The currency's strongest level of the session was C$1.3201,
while it touched its weakest since March 16 at C$1.3296.
    A stimulus budget from Canada's new Liberal government,
combined with a modest recovery in oil and non-commodity
exports, makes it likely the Bank of Canada's next move will be
an interest rate hike rather than a cut. 
    However, the fiscal measures announced this week had little
impact on the currency, with the C$29.4 billion shortfall close
to what analysts had expected. 
    Canadian government bond prices were lower across the
maturity curve. The two-year price fell 1 Canadian
cent to yield 0.566 percent and the benchmark 10-year
 was down 25 Canadian cents to yield 1.274 percent.
    The curve steepened in sympathy with U.S. Treasuries, as the
spread between the 2-year and 10-year yields widened 2.1 basis
points to 70.8 basis points, indicating underperformance for
longer-dated maturities.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli and
Alistair Bell)