CANADA FX DEBT-C$ weakens from near 1-week high, buoyed by OPEC deal

Thu Sep 29, 2016 5:03pm EDT
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(Adds dealer comment, updates prices to close)
    * Canadian dollar ends at C$1.3149, or 76.05 U.S. cents
    * Loonie touches its strongest since Friday at C$1.3048
    * Bond prices higher across the yield curve
    * 10-year Canada-U.S. spread hits its widest in six months

    By Alastair Sharp
    TORONTO, Sept 29 (Reuters) - The Canadian dollar fell back
from a nearly one-week high against its U.S. counterpart on
Thursday as the buzz from a deal between major oil producers to
limit output wore off and investors fretted about the health of
Deutsche Bank.
    The slip for the loonie followed a 0.7 percent advance on
Wednesday, its biggest in nearly four weeks, after the
Organization of the Petroleum Exporting Countries agreed to
limit crude output at its policy meeting in November.
    "If you were really bullish on Canada, you would point to it
(the OPEC deal) and say this could be the embryonic stage of a
Canadian economy resurgence and strength for the loonie," said
Brad Schruder, director of corporate sales and structuring at
BMO Capital Markets.
    But he said that troubles at Deutsche, whose
U.S.-listed shares hit a record low on fresh concerns about the
stability of Germany's largest lender, were pressuring a range
of risk-friendly currencies including the Canadian dollar.
    The Canadian dollar settled at C$1.3149 to the
greenback, or 76.05 U.S. cents, weaker than Wednesday's close of
C$1.3109, or 76.28 U.S. cents.
    Oil prices jumped more than 1 percent, adding to a sharp
jump on Wednesday, when OPEC said its members had agreed to cut
output for the first time in eight years.     
    The Canadian currency's weakest level of the session was
C$1.3184, while it touched its strongest since Friday at
    On Tuesday, the loonie hit its weakest in nearly six months
at C$1.3281, pressured by recent disappointing domestic economic
data and a more dovish tone from the Bank of Canada.
    Domestic gross domestic product data for July is due on
Friday. The economy is expected to have grown by 0.3 percent,
which would reinforce expectations that it rebounded in the
third quarter after contracting in the second. 
    Canadian government bond prices were higher across the yield
curve, with the two-year up 3.5 Canadian cents to
yield 0.494 percent and the benchmark 10-year rising
28 Canadian cents to yield 0.951 percent.
    The 10-year yield fell 2.1 basis points further below its
U.S. counterpart as the rate of growth for the U.S. economy was
revised higher for the second quarter. That left the spread at
-60.3 basis points, its widest since March 30.

 (Additional reporting by Fergal Smith; Editing by Meredith
Mazzilli and Marguerita Choy)