CANADA FX DEBT-C$ gives up earlier gains on data as crude plunges
(Updates with fresh commentary, closing figures) * Canadian dollar at C$1.3222, or 75.63 U.S. cents * Bond prices mostly higher across the maturity curve By Solarina Ho TORONTO, Sept 1 (Reuters) - The Canadian dollar gave up data-fueled gains against the greenback on Tuesday, as crude prices plunged on fresh anxiety over the impact of slowing growth in China on the global economy. The latest economic numbers out of China indicated the country's manufacturing sector shrank at its fastest pace in three years and the services sector was also cooling. The latest round of disappointing Chinese figures sowed renewed fears about the world's second largest economy and one of the biggest commodities consumers. The report sent the price of oil, a key Canadian export, plummeting some 8 percent. Prior to Tuesday, prices had rallied roughly 25 percent over three sessions. "Nobody is that confident on oil prices. It's still noisy and there's still a lot of volatility," said Amo Sahota, director at Klarity FX in San Francisco. The Canadian dollar finished at C$1.3222 to the greenback, or 75.63 U.S. cents, not far from the Bank of Canada's official close of C$1.3157, or 76.01 U.S. cents on Monday. The loonie traded between C$1.3116 and C$1.3233 during the session. The currency bounced earlier on data that showed Canada's economy, hurt by falling crude prices over the past year, contracted by an annualized 0.5 percent in the second quarter, indicating a recession in the first half of the year. Economic activity in June grew by a better-than-expected 0.5 percent, however, the first monthly increase in six months, which appeared to bode well for the third quarter. Economists polled by Reuters forecast 0.2 percent growth. "Reading this morning's GDP data, I wondered, are analysts looking at this glass half full or half empty?" said Sahota, noting that some of the optimism over the June numbers could be premature if gains were due to one-off factors. The volatility in August could also have a more detrimental impact on the third quarter, he added. Canada's sluggish economy during the first half of 2015 prompted the Bank of Canada to cut interest rates twice by 25 basis points. Market participants are divided over whether the Bank of Canada will stand pat or make another interest rate cut. Canadian government bond prices were mostly higher across the maturity curve, with the two-year price up 3 Canadian cents to yield 0.424 percent and the benchmark 10-year rising 57 Canadian cents to yield 1.431 percent. The Canada-U.S. two-year bond spread was -28.8 basis points, while the 10-year spread was -72.9 basis points. (Editing by Jeffrey Benkoe; Editing by Leslie Adler)
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