CANADA FX DEBT-C$ weakens to a six-week low as retail sales, oil fall
* Canadian dollar at C$1.3125, or 76.19 U.S. cents * Bond prices mixed across the maturity curve (Adds details, quote, updates prices) By Fergal Smith and Leah Schnurr TORONTO/OTTAWA, May 20 (Reuters) - The Canadian dollar weakened to a six-week low against the greenback on Friday as domestic retail sales data disappointed and oil fell, while expectations grew that the United States could raise interest rates this summer. Canadian retail sales fell 1 percent in March, exceeding economists' forecasts for a decrease of 0.6 percent, as consumers bought fewer cars, while separate data showed that core inflation rose to 2.2 percent. The mixed data leaves the Bank of Canada on hold next week, keeping a watch on the wildfire in Alberta, said David Watt, chief economist at HSBC Bank Canada, who expects the central bank to ease before year-end as the lack of momentum in the economy becomes more evident. Economists say second-quarter growth may slow to a standstill, impacted by a wildfire that has cut production in Alberta's oil sands. U.S. crude prices settled at $47.75 a barrel, down 41 cents. The Canadian dollar ended the North American session at C$1.3124 to the greenback, or 76.20 U.S. cents, weaker than Thursday's close of C$1.3105, or 76.31 U.S. cents. The currency touched its weakest level since April 7 of C$1.3162. The reorienting of U.S. Federal Reserve interest rate hike expectations, which revived investor interest in the greenback, has also weighed on the Canadian dollar in recent sessions even as the price of oil has climbed toward $50 a barrel, said Amo Sahota, director at Klarity FX in San Francisco. "There's a nice little trend reversal or corrective pattern underway in U.S. dollar-Canadian dollar," Sahota added. On this side of the border, the Bank of Canada is widely expected to hold rates at 0.50 percent when it meets next week. Speculators adjusted their Canadian dollar bets against the currency for the first time since January, Commodity Futures Trading Commission data showed. Net long Canadian dollar positions fell to 22,706 contracts in the week ended May 17 from 25,874 contracts in the prior week. A suggestion by Canadian Prime Minister Justin Trudeau on Thursday that a C$30 billion budget deficit was not a hard limit was taken in stride by the bond market, according to Andrew Kelvin, senior rates strategist at TD Securities. Canadian government bond prices were mixed across the maturity curve, with the two-year price flat to yield 0.625 percent and the benchmark 10-year falling 1 Canadian cent to yield 1.349 percent. (Editing by Sandra Maler)
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