CANADA FX DEBT-Oil supports C$ but economic unease offsets gains

Thu May 5, 2016 4:32pm EDT
 
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* Canadian dollar at C$1.2868, or 77.71 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    TORONTO/OTTAWA, May 5 (Reuters) - The Canadian dollar was
little changed against the greenback on Thursday as the benefit
from a rally in oil was tempered by worries that economic growth
could be weaker than anticipated.
    Still, the slight gain was a reprieve after a more than 2
percent drop over the past two sessions as weaker-than-expected
trade data released this week has weighed on Canada's growth
outlook. 
    BMO Capital Markets cut its estimate for first-quarter
growth to 2.9 percent annualized from 3.3 percent previously,
and its projection for second-quarter growth to 1.3 percent from
1.5 percent.
    "People got ahead of themselves with how strong the Canadian
economic data was and could be throughout the rest of the year,"
said Rahim Madhavji, president at KnightsbridgeFX.com.
    "We're going to see people temper their expectations."
    Economists also expect that oil production cuts due to the
massive wildfire in the province of Alberta could weigh on May
gross domestic product. That could bode poorly for
second-quarter growth, which is already expected to cool from
the first quarter's relatively strong pace. 
    The Canadian dollar ended the North American
session at C$1.2868 to the greenback, or 77.71 U.S. cents, a tad
stronger than Wednesday's close of C$1.2870, or 77.70 U.S.
cents.
    The higher price of oil had helped the commodity-sensitive
currency rise as far as C$1.2787 earlier in the session. U.S.
crude prices settled up 54 cents to $44.32 a barrel on
Canadian production cuts, though a rise in U.S. stockpiles
capped oil's gains. 
    The loonie is still up more than 12 percent since hitting a
12-year low of C$1.4689 in January. However, analysts expect the
currency will not be able to hold on to all of those gains.
 
    Investors were also looking ahead to Friday's employment
report, which is forecast to show Canadian job growth stalled in
April after an unexpectedly strong gain in March. Still, that is
seen pushing the unemployment rate up to 7.2 percent. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 2 Canadian
cents to yield 0.568 percent and the benchmark 10-year
 up 45 Canadian cents to yield 1.356 percent, its
lowest since April 20.

 (Reporting by Leah Schnurr and Fergal Smith; Editing by James
Dalgleish)