CANADA FX DEBT-C$ weakens as China trade data, lower oil prices weigh
* Canadian dollar at C$1.3365, or 74.82 U.S. cents * Bond prices higher across a flatter maturity curve TORONTO, March 8 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday as weak Chinese data weighed on risk appetite and oil prices turned lower, but still held near 3-1/2-month highs ahead of the Bank of Canada policy decision on Wednesday. A drop in global stocks provided a headwind for the risk-sensitive commodity related currency after China's exports tumbled the most in six years, although that decline was impacted by the timing of the Lunar Year holidays. Crude oil prices turned lower after posting fresh multi-month highs on hopes for a coordinated approach by major producers to support prices. U.S. crude prices were down 0.45 percent to $37.73 a barrel. The Bank of Canada is expected to hold interest rates at 0.50 percent as it waits to see what impact the government's expected spending measures will have on the economy. The measures will be presented with the March 22 budget. The currency has rebounded roughly 10 percent since hitting a 12-year low on Jan. 20 at C$1.4689 when the central bank surprised many traders by not cutting rates. However, too sharp a rally in the currency could hinder a pick-up in exports that appears to be underway. At 9:26 a.m. EST (1426 GMT), the Canadian dollar was trading at C$1.3365 to the greenback, or 74.82 U.S. cents, weaker than Monday's close of C$1.3276, or 75.32 U.S. cents. The currency's strongest level of the session was C$1.3281, while its weakest was C$1.3368. It had touched on Monday its strongest since Nov. 19 at C$1.3262. Canadian housing data was mixed. Seasonally adjusted housing starts jumped to 212,594 in February, compared with a revised 165,071 units in January, data from Canada Mortgage and Housing Corporation showed. The value of Canadian building permits, however, dropped by 9.8 percent in January from December, wiping out the previous month's revised gain of 7.7 percent, data from Statistics Canada showed. Canadian government bond prices rose across the maturity curve, with the two-year price up 5 Canadian cents to yield 0.51 percent and the benchmark 10-year rising 67 Canadian cents to yield 1.202 percent. The curve flattened in sympathy with U.S. Treasuries as longer-dated maturities outperformed. The spread between the 2-year and 10-year yields narrowed by 4.7 basis points to 69.2 basis points. On Monday, it touched its widest since Feb. 5 at 73.9 basis points. (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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