CANADA FX DEBT-C$ weakens to a six-week low as retail sales, oil fall

Fri May 20, 2016 6:45pm EDT
 
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* 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)