CANADA FX DEBT-C$ weaker ahead of Bank of Canada, oil fall weighs
(Adds trader comment, updates prices) * Canadian dollar at C$1.3416, or 74.54 U.S. cents * Bond prices higher across maturity curve By Alastair Sharp TORONTO, March 8 (Reuters) - The Canadian dollar weakened against its U.S. counterpart and a string of other currencies on Tuesday as market participants reacted to weak Chinese data and lower oil prices and braced for a Bank of Canada policy decision on Wednesday. It settled at C$1.3416 to the greenback, or 74.54 U.S. cents, much weaker than Monday's close of C$1.3276, or 75.32 U.S. cents. The currency has rebounded sharply since hitting a 12-year low at C$1.4689 on Jan. 20, when the central bank surprised many traders by not cutting rates. Given the recent appreciation and with another rate decision pending, some traders are positioning for another wrinkle. "There's a little nervousness about (Governor Stephen) Poloz doing something that the market's not expecting," said David Bradley, director of foreign exchange trading at Scotiabank. "I don't think there were too many people who thought we'd see it trade on a C$1.32 handle ahead of the Bank of Canada." The central bank 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 loonie's recent rally also coincided with rising prices for crude oil, a major Canadian export. But oil prices fell 3 percent on Tuesday, retreating after six days of gains for benchmark Brent crude, as Goldman Sachs suggested the rally was unsustainable and analysts predicted U.S. stockpiles reached record highs again last week. Global stocks also slipped, weighing on the risk-sensitive commodity currency, while China's exports tumbled the most in six years, although that decline was impacted by the timing of the Lunar Year holidays. The Canadian currency's strongest level of the session was C$1.3281, while its weakest was C$1.3425. It had touched on Monday its strongest since Nov. 19 at C$1.3262. It also fell sharply against the Japanese yen and Swiss franc, and was weaker versus the euro. Canadian government bond prices rose across the maturity curve on Tuesday, with the two-year price up 7.5 Canadian cents to yield 0.496 percent and the benchmark 10-year rising 83 Canadian cents to yield 1.185 percent. The spread between the 2-year and 10-year yields narrowed by 5 basis points to 68.9 basis points. On Monday, it touched its widest since Feb. 5 at 73.9 basis points. (Additional reporting by Fergal Smith; Editing by Meredith Mazzilli)
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