CANADA FX DEBT-C$ weakens, hits seven-week low before paring losses
(Adds analyst quotes, details, updates prices) * Canadian dollar at C$1.3373, or 74.78 U.S. cents * Bond prices mixed across the maturity curve By Fergal Smith TORONTO, Nov 23 (Reuters) - The Canadian dollar hit a seven-week low against the U.S. dollar on Monday, pressured by a fresh sell-off in commodity markets, but it managed to pare losses after Saudi Arabia issued a statement supportive of crude oil prices. Hawkish comments over the weekend from Federal Reserve Bank of San Francisco President John Williams and an eight-month high for the U.S. dollar helped trigger another sell-off in commodity markets, pressuring on crude oil. "Oil prices are the key driver," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets, after the Canadian dollar tracked fluctuation in the price of crude oil. Reitzes expects the Canadian dollar to weaken further against the greenback, pressured by anticipated Federal Reserve tightening in December, a sidelined Bank of Canada and further downside risk to oil prices. U.S. crude prices settled at $41.75 a barrel, down 0.36 percent, but up from a $40.41 low, while Brent crude added 0.67 percent to $44.96. U.S. manufacturing and housing data were weaker than expected, but the underlying trend for housing remained firm , while Canada's data calendar was empty. The Canadian dollar closed at C$1.3373 to the greenback, or 74.78 U.S. cents, weaker than Friday's official close of C$1.3345, or 74.93 U.S. cents. The currency's strongest level of the session was C$1.3326, while its weakest level was C$1.3436, in sight of the 11-year low hit in September at 1.3457. Against the euro, the Canadian dollar was unchanged at C$1.4212 despite business activity in the euro zone picking up at its fastest pace since mid-2011. "The PMIs of Europe were solid, but nobody thinks that's going to keep the ECB from easing," said Reitzes. Canadian government bond prices were mixed across the maturity curve, with the two-year price down 1 Canadian cent to yield 0.622 percent and the benchmark 10-year rising 6 Canadian cents to yield 1.618 percent. The curve flattened in sympathy with U.S. Treasuries, as the spread between the 2-year and 10-year yields narrowed by more than a basis point to below +100 basis points, indicating outperformance for longer-dated maturities. The Canada-U.S. two-year bond spread widened 1.2 basis points to -30.8 basis points, extending recent underperformance by Treasuries at the front of the curve in anticipation of a Fed rate hike as early as next month. (Reporting by Fergal Smith; Editing by Nick Zieminski and Dan Grebler)
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