CANADA FX DEBT-C$ weakens to a 1-week low after trade data disappoints
* Canadian dollar at C$1.3181, or 75.87 U.S. cents * Loonie touches its weakest since March 29 at C$1.3208 * Bond prices higher across flatter maturity curve By Fergal Smith TORONTO, April 5 (Reuters) - The Canadian dollar weakened to a one-week low against its U.S. counterpart on Tuesday after disappointing Canadian trade data and as risk appetite deteriorated. Canada's trade deficit unexpectedly jumped to C$1.91 billion ($1.45 billion) in February from C$628 million in January as exports slumped by their most in nearly seven years, Statistics Canada data indicated. "It suggests to me that the momentum that we seemed to have at the turn of the year in the economy is again going to be a false dawn," said HSBC Bank Canada Chief Economist David Watt. The risk-sensitive, commodity-driven currency had already weakened before the trade data as investors sought refuge in safe-haven assets such as the Japanese yen and gold. The implied probability of a Bank of Canada rate cut this year rose to 24 percent from 17 percent before the data. It had been above 50 percent a little more than one month ago. "I think they (the Bank of Canada) still have to remain poised to take further action," said Watt. At 9:27 a.m. EDT (1327 GMT), the Canadian dollar was trading at C$1.3181 to the greenback, or 75.87 U.S. cents, much weaker than Monday's close of C$1.3072, or 76.50 U.S. cents. The currency's strongest level of the session was C$1.3069, while it touched its weakest since March 29 at C$1.3208. Canadian government bond prices were higher across the maturity curve, with the two-year up 5 Canadian cents to yield 0.52 percent and the benchmark 10-year rising 48 Canadian cents to yield 1.171 percent. The 10-year yield touched its lowest since March 8 at 1.161 percent. The curve flattened in sympathy with U.S. Treasuries, as the spread between the 2-year and 10-year yields narrowed by 2.9 basis points to 65.1 basis points, indicating outperformance for longer-dated maturities. Bank of Canada Senior Deputy Governor Carolyn Wilkins will give a speech in Vancouver on China's economic transition and what it means for Canada. Remarks will be published at 3:45 p.m. EDT (1945 GMT). The price of U.S. crude oil was down 0.9 percent at $35.37 a barrel. (Reporting by Fergal Smith; Editing by Lisa Von Ahn)
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