CANADA FX DEBT-C$ weakens to 2-week low on trade data, oil output fears
* Canadian dollar at C$1.2805, or 78.09 U.S. cents * Loonie touches weakest level since April 18 * Bond prices higher across maturity curve By Fergal Smith TORONTO, May 4 (Reuters) - The Canadian dollar weakened to a two-week low against its U.S. counterpart on Wednesday after disappointing domestic trade data and as a wildfire threatened production in the country's oil sands region. The trade deficit in March unexpectedly widened to a record C$3.41 billion ($2.66 billion) as exports sank for a second month on widespread weakness, Statistics Canada data indicated. The economy remains on track to grow more than 3 percent in the first quarter, but the data provides a "weak handoff" going into the second quarter, said Paul Ferley, the assistant chief economist at Royal Bank of Canada. "Certainly as we move through the second quarter the Bank (of Canada) is going to be wanting to see indications of exports rebounding," he added. Fire raged unchecked overnight through the Western Canadian city of Fort McMurray, the heart of Canada's oil sands region. It will likely weigh on Canada's gross domestic product in May as production is cut back. World stocks fell for the second successive day and metals prices declined amid signs of a renewed and prolonged downturn in global growth, adding to headwinds for Canada's risk-sensitive resource-linked currency. At 9:21 a.m. EDT (1321 GMT), the Canadian dollar was trading at C$1.2805 to the greenback, or 78.09 U.S. cents. That compared to Tuesday's close of C$1.2713, or 78.66 U.S. cents. The currency's strongest level of the session on Wednesday was C$1.2698, while it touched its weakest since April 18 at C$1.2825. Oil prices rose as reduced production in Canada's oil sands region pushed aside concern about excess global supplies and expectations of rising U.S. crude inventories. U.S. crude prices were up 1.90 percent to $44.48 a barrel. Most automakers reported higher Canadian sales in April. Canadian government bond prices were higher across the maturity curve, with the two-year price up 5.5 Canadian cents to yield 0.615 percent and the benchmark 10-year rising 22 Canadian cents to yield 1.436 percent. The Canada-U.S. two-year bond spread was 2 basis points more negative at -13.5 basis points, while the 10-year spread was 1.2 basis points more negative at -35.3 basis points as Canadian government bonds outperformed. (Reporting by Fergal Smith; Editing by Paul Simao)
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