CANADA FX DEBT-C$ weakest close in over a decade, hit by data, oil
(Recasts with currency moves, closing figures, strategist comment) * Canadian dollar at C$1.3080 or 76.45 U.S. cents * Weakest finish since Aug. 2004 * Bond prices higher across the maturity curve By Solarina Ho TORONTO, July 31 (Reuters) - The Canadian dollar finished the session at its weakest level in more than a decade against the U.S. dollar on Friday, burdened by U.S. crude prices that had their biggest monthly fall since 2008 and figures that showed the Canadian economy shrank in May for the fifth straight month. The economy unexpectedly shrank by 0.2 percent in May from April, the latest sign Canada was likely in recession in the first half of the year. The loonie was also weighed by another decline in prices for oil, a major Canadian export, squeezed by supply glut worries after the OPEC cartel indicated there would be no cuts in production. U.S. crude, which posted its biggest monthly drop since 2008 by falling 21 percent in July, settled down nearly 3 percent at $48.21 a barrel. Brent crude lost 2 percent to end at $52.21. The Canadian dollar ended the session at C$1.3080 to the U.S. dollar, or 76.45 U.S. cents, its weakest finish since August 2004 and softer than the Bank of Canada's official close of C$1.3010, or 76.86 U.S. cents, on Thursday. The currency, which lost some 4.7 percent in July, swung widely between C$1.2940 and C$1.3099 during the session and was among the day's biggest underperformers. The weakness came even as the greenback fell against a basket of major currencies on figures that showed employment costs, the broadest measure of labor costs, recorded its smallest increase in 33 years. This drove markets to pare bets on predictions the U.S. Federal Reserve will resume raising interest rates as early as September. "We've only got very few data points left between now and Sept. We're really threading the eye of the needle here. Everything's got to be dead-on," said Amo Sahota, director at Klarity FX in San Francisco. Despite Friday's data, the overall expectation is still for the Fed to hike interest rates sometime in the coming months, in complete contrast to the Bank of Canada, which just finished delivering its second rate cut this year. "(It's) choppy ... but everybody still knows that ultimately (U.S.) rates are still going up," said Sahota. Canadian government bond prices were higher across the maturity curve, with the two-year price up 9 Canadian cents to yield 0.409 percent and the benchmark 10-year rising 48 Canadian cents to yield 1.441 percent. The Canada-U.S. two-year bond spread narrowed to -26 basis points, while the 10-year spread narrowed to -74.6 basis points. (Reporting by Solarina Ho; editing by Peter Galloway)
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