CANADA FX DEBT-C$ weakens on domestic data, drop in oil prices
* Canadian dollar at C$1.2684, or 78.84 U.S. cents * Bond prices mixed across the maturity curve TORONTO, April 20 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as weaker than expected domestic data and a drop in oil prices weighed, one-day after the currency made a nine-month high. Canadian wholesale trade dropped by more than expected in February, falling 2.2 percent from January on declines in most industries, data from Statistics Canada showed. It followed three consecutive monthly increases. Oil prices fell as investor focus returned to worries about oversupply after Kuwaiti workers ended a three-day strike that had halved the nation's crude output. U.S. crude prices were down 2.31 percent to $40.13 a barrel. At 9:01 a.m. EDT (1301 GMT), the Canadian dollar was trading at C$1.2684 to the greenback, or 78.84 U.S. cents, weaker than Tuesday's close of C$1.2660, or 78.99 U.S. cents. The currency's strongest level of the session was C$1.2646, while its weakest was C$1.2731. On Tuesday, the loonie touched its strongest since July 6 at C$1.2630. The Bank of Canada is looking closely at what level of inflation it should aim for as it prepares for talks with the government about renewing its mandate, but the bar to change is still high, Governor Stephen Poloz said on Tuesday. Last week, the central bank warned that the country's improving economy faced downside risks, including a stronger currency that could drag on non-commodity exports, although it held interest rates steady and raised growth forecasts. Canadian government bond prices were mixed across a flatter maturity curve. The two-year price fell 0.5 of a Canadian cent to yield 0.618 percent and the benchmark 10-year rose 11 Canadian cents to yield 1.313 percent. The Canada-U.S. 10-year spread was 1.1 basis points more negative at -46.8 basis points as Canadian government bonds outperformed. On Tuesday, it touched its smallest gap since May last year at -45.7 basis points. Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will appear before the Senate Standing Committee on Banking, Trade and Commerce at 4:15 p.m. EDT (2015 GMT). (Reporting by Fergal Smith; Editing by Nick Zieminski)
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