CANADA FX DEBT-C$ softens on weaker oil, caution over Greece
* Canadian dollar at C$1.2560 or 79.62 U.S. cents * Bond prices higher across the maturity curve (New throughout, updates prices and market activity to close; adds analyst comment, adds byline) By Leah Schnurr OTTAWA, July 3 (Reuters) - The Canadian dollar weakened modestly against the greenback in a quiet session on Friday as oil prices slipped and data showed service-sector activity slowed in China, giving the loonie its biggest weekly decline since May. Investors were treading cautiously heading into Sunday's Greek referendum on bailout terms with lenders. An opinion poll showed supporters of the terms have taken a slim lead. Greece missed a payment to the International Monetary Fund this week, after talks between the country and international lenders collapsed last weekend. Fallout from the referendum could determine whether the country remains in the euro zone. "Oil taking another leg lower today hasn't really helped the prospects of the loonie," said Scott Smith, senior market analyst at Cambridge Global Payments in Calgary. "But at the same time, you get the feeling that market participants are a little wary to take any big, outsized positions ahead of the weekend, just because of the uncertainty that lies around what may happen with the referendum in Greece." A combination of the developments in Greece, disappointing Canadian economic data and soft oil prices has seen the Canadian dollar lose 2 percent this week. The Canadian dollar ended the North American session at C$1.2560 to the greenback, or 79.62 U.S. cents, weaker than the Bank of Canada's official close of C$1.2545, or 79.71 U.S. cents. Volume was lower than usual with U.S. markets closed for the Independence Day holiday. The currency's strongest level of the session was C$1.2538, while its weakest level was C$1.2602. Still, the loonie did not fall as far as the two-and-a-half-month low it hit on Thursday. If Greece votes 'no' in its referendum and U.S. data looks better in the coming weeks, the loonie could fall as far as the high C$1.26 to low C$1.27 area, said Smith. U.S. crude prices settled down $1.75 at $60.32 a barrel on worries about global oversupply. Activity in China's services sector slowed to its lowest in five months in June, data showed, suggesting the economy needs further policy support. Canadian government bond prices were higher across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.484 percent and the benchmark 10-year rising 43 Canadian cents to yield 1.696 percent. The Canada-U.S. two-year bond spread was -14.9 basis points, while the 10-year spread was -68.9 basis points. (Reporting by Leah Schnurr; Editing by Phil Berlowitz and David Gregorio)
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