CANADA FX DEBT-C$ weaker after weak retail sales data; bonds rise
(Adds strategist comment, updates prices) * Canadian dollar settles at C$1.3345, or 74.93 U.S. cents * Bond prices mixed across the maturity curve By Alastair Sharp TORONTO, Nov 20 (Reuters) - The Canadian dollar weakened against the U.S. dollar and Canadian government bonds outperformed Treasuries on Friday as weaker-than-anticipated retail sales data and volatile crude oil price action weighed. The currency ended the week testing the weakest levels of its recent range between C$1.3250 and C$1.3370, after a string of domestic data darkened the economic outlook just as the Federal Reserve prepares to raise U.S. interest rates. "Over the course of the week it's just been a run of weak data but Canada's (currency) has proven to be fairly sticky and has been unable to push through C$1.3380 resistance," said Mazen Issa, a senior foreign exchange strategist at Toronto-Dominion Bank based in New York. The Canadian dollar settled at C$1.3345 to the greenback, or 74.93 U.S. cents, weaker than Thursday's official close of C$1.3297, or 75.20 U.S. cents. Speculators have increased bearish bets on the Canadian dollar, according to data released on Friday by the U.S. Commodity Futures Trading Commission. Issa said that U.S. crude oil's fall below $40 a barrel before recovering had added to pressure on the currency of Canada, a major energy exporter. Retail sales unexpectedly fell 0.5 percent in September, dragged down by lower fuel prices and slower auto sales, data from Statistics Canada showed on Friday. Earlier in the week, wholesale trade and factory sales data both unexpectedly fell. "We do think there is one more leg higher in dollar/Canada," Issa said. "It's more likely to be a policy-induced catalyst than it is to be driven by data." Against the euro, the Canadian dollar firmed 0.3 percent to C$1.4212 after European Central Bank President Mario Draghi fed expectations for additional policy easing in December. Canadian government bond prices were mixed across the maturity curve, with the two-year price up half a Canadian cent to yield 0.617 percent and the benchmark 10-year slipping 2 Canadian cents to yield 1.625 percent. The Canada-U.S. two-year bond spread was 2.7 basis points wider at -30 basis points, its widest since mid-September as investors raised their bet that Canadian interest rates will lag their U.S. counterparts. (Additional reporting by Fergal Smith; Editing by W Simon and James Dalgleish)
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