CANADA FX DEBT-C$ weakens despite oil rally
(Recasts with Canadian currency weaker; adds comment; updates prices) * Canadian dollar ends at C$1.3237, or 75.55 U.S. cents * Bond prices higher across yield curve By Alastair Sharp and Fergal Smith TORONTO, Sept 26 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday despite rising oil prices, as investors turned cautious ahead of the first U.S. presidential debate. "The Canadian dollar hasn't been able to take advantage of" the higher oil prices, said Darren Richardson, a senior corporate dealer at CanadianForex. He added that the commodity-linked currency had been "caught up in that negative sentiment" that had also broadly weighed on stock markets. The Canadian dollar settled at C$1.3237 to the greenback, or 75.55 U.S. cents, weaker than Friday's close of C$1.3171, or 75.92 U.S. cents. Oil settled up 3 percent as the world's largest producers gathered in Algeria to discuss ways to support prices. Canadian diplomats are fanning out across the United States to talk up the benefits of trade with state and local leaders and counter what senior officials see as a worrying mood of protectionism swirling through the U.S. election campaign. The currency's slip followed losses on Friday as oil tumbled and domestic inflation and retail sales data disappointed. Talk that the Bank of Canada was more inclined to ease monetary policy than tighten it was revived after Friday's data showed Canada's annual inflation rate in August dipped to a 10-month low and retail sales unexpectedly fell in July. The implied probability of a Bank of Canada rate cut by mid-2017 has increased to more than 40 percent from less than 20 percent before the inflation report, overnight index swaps data shows. Canadian government bond prices were higher across the yield curve, with the two-year up 13.5 Canadian cents to yield 0.497 percent and the benchmark 10-year rising a full Canadian dollar to yield 0.995 percent. The 10-year yield has tumbled from a 1.281 percent peak in mid-September. Earlier in the session, it hit its lowest level since Sept. 8, at 0.990 percent. The currency's strongest level of the Monday session was C$1.3136, while it touched its weakest level in more than a week at C$1.3243. Speculators pared bullish bets on the Canadian dollar for the third straight week, Commodity Futures Trading Commission data showed on Friday. Net long Canadian dollar positions dipped to 16,303 contracts in the week ended Sept. 20 from 17,058 contracts in the prior week. (Editing by Lisa Von Ahn and Leslie Adler)
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