CANADA FX DEBT-C$ rises against U.S. dollar on higher oil, slides vs euro
(Adds analyst quote, updates prices, updates details) * Canadian dollar at C$1.3338, or 74.97 U.S. cents * Bond prices much lower across a steeper maturity curve By Fergal Smith TORONTO, Dec 3 (Reuters) - The Canadian dollar firmed against the greenback on Thursday, helped by a rebound in crude oil prices, but fell sharply against the euro after the European Central Bank eased policy less aggressively than some investors had expected. Crude prices rallied ahead of an OPEC meeting on Friday, as traders hedged their positions in case of a surprise outcome. Uncertainty as to what OPEC is going to do is "underwriting the volatility in the Canadian dollar," according to Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. The European Central Bank cut its deposit rate to -0.3 percent from its existing -0.2 percent and extended its asset purchase program to run until the end of March 2017. The Canadian dollar closed at C$1.3338 to the greenback, or 74.97 U.S. cents, slightly stronger than Wednesday's close of C$1.3349, or 74.91 U.S. cents. The currency rebounded from a nine-day low on Wednesday after the Bank of Canada used less dovish language in its policy statement than some expected. Against the euro, the Canadian dollar tumbled to C$1.4602, having touched C$1.4647, its weakest level in five weeks. U.S. crude prices settled at $41.08 a barrel, up 2.85 percent, Brent crude added 3.53 percent to $43.99. Canadian government bond prices were much lower across the maturity curve, tracking weakness in German Bunds after the ECB news. The two-year price was down 6.5 Canadian cents to yield 0.656 percent and the benchmark 10-year tumbled C$1.02 to yield 1.627 percent. The curve steepened, as the spread between the 2-year and 10-year yields widened by 7.5 basis points to 97.1 basis points, paring recent outperformance for longer-dated maturities. The Canada-U.S. 10-year spread was 3.2 basis points wider at -69.5 basis points, as comments by Federal Reserve Chair Janet Yellen did little to dampen expectations for a rate hike this month, adding to pressure on Treasuries. Canada's November employment report will be released on Friday and is expected to show the economy lost 10,000 jobs after jumping 44,400 in October, according to a Reuters poll. (Reporting by Fergal Smith; Editing by Bernadette Baum and Jonathan Oatis)
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