CANADA FX DEBT-C$ weakens against broadly stronger greenback as oil falls

Fri May 13, 2016 5:50pm EDT
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(Adds analyst comment, details on Alberta, Fed, Trudeau, CFTC
data, updates prices)
    * Canadian dollar at C$1.2935, or 77.31 U.S. cents
    * Bond prices higher across flatter maturity curve

    By Fergal Smith
    TORONTO, May 13 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as oil fell and
stronger-than-expected U.S. data supported the greenback.
    Better news from Alberta this week, where some production
restarted at oil sands facilities following a wildfire, has
since been offset by stronger-than-expected U.S. retail sales
data and hawkish comments by U.S. Federal Reserve officials.
    The Fed has been more forthright over the last 24 hours in
telling the market it has underestimated the potential for
interest rate hikes this year, said Dean Popplewell, vice
president of currency analysis at OANDA.
    The U.S. dollar climbed to a two-week peak against a
basket of currencies on Friday as the retail sales data appeared
to boost expectations the Fed will raise interest rates more
than once this year.  
    Oil prices fell, ending a three-day rally as a strong dollar
weighed and investors cashed in on recent gains, but losses were
cushioned by outages in Nigeria that have slashed output to the
lowest in over two decades. U.S. crude prices fell 0.7
percent to $46.37 a barrel.    
    The Canadian dollar ended at C$1.2935 to the
greenback, or 77.31 U.S. cents, weaker than Thursday's close of
C$1.2834, or 77.92 U.S. cents.
    After making a recent 10-month high of C$1.2461, the loonie
earlier this week hit its weakest in one month of C$1.3016.
    "It's really a rudderless ship at the moment," said
Popplewell, who added that fluctuation in oil this week left
investors without clear direction.
    Canadian Prime Minister Justin Trudeau got a first-hand look
on Friday at the damage from a devastating wildfire which cut
production in Alberta's oil sands region and weakened the
outlook for Canada's economy. Economists say
second-quarter growth may slow to a standstill. 
    Still speculators have increased bullish bets on the loonie,
Commodity Futures Trading Commission data showed. Net long
Canadian dollar positions rose to 25,874 contracts in the week
ended May 10 from 18,943 contracts in the prior week.
    Canadian government bond prices were higher across a flatter
maturity curve. The two-year rose 2.5 Canadian cents
to yield 0.554 percent and the benchmark 10-year 
climbed 38 Canadian cents to yield 1.279 percent. The 10-year
yield touched its lowest since April 18 of 1.265 percent.

 (Reporting by Fergal Smith; Editing by Jeffrey Benkoe and
Sandra Maler)