CANADA FX DEBT-C$ weaker as lower oil prices offset firm domestic data

Thu Jul 21, 2016 4:20pm EDT
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(Adds analyst comment, poll details, updates prices)
    * Canadian dollar settles at C$1.3086, or 76.42 U.S. cents
    * Bond prices higher across the maturity curve
    * Ten-year yield touches highest since June 24 at 1.174

    By Alastair Sharp
    TORONTO, July 21 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as renewed worries
about a global oil glut weighed, more than offsetting
stronger-than-expected domestic wholesale trade data.
    Prices for oil , a major Canadian export, fell
more than 2 percent after a rise in U.S. gasoline inventories
helped push total U.S. petroleum supplies to a record high.
    Meanwhile the value of Canadian wholesale trade surged by
1.8 percent in May from April, led by the motor vehicle and auto
parts subsector, Statistics Canada said. In volume terms sales
rose by 1.5 percent. 
    "Right now the main factor affecting the softness of the
loonie is oil," said Alphonso Esparza, a senior market analyst
at OANDA Corp, referring to the Canadian currency by its common
colloquial name. 
    "Crude is being pushed downward just because of the comments
from the Russian energy minister yesterday that there's no real
back-and-forth or open line of communication with OPEC," he
    Russia's Alexander Novak said there were no discussions
about possible coordination with OPEC on oil output after a
failed attempt to jointly maintain production levels earlier
this year. 
    The Canadian dollar ended the session at C$1.3086
to the greenback, or 76.42 U.S. cents, weaker than Wednesday's
close of C$1.3055, or 76.60 U.S. cents.
    The currency's strongest level of the session was C$1.3023,
while its weakest was C$1.3101, its weakest intraday level since
July 12.
    Canadian economic growth will pick up a bit next year,
helped by federal fiscal stimulus, but subdued U.S. demand and
weak oil prices are expected to limit gains, a Reuters poll
    A long-awaited child benefit payment that kicked in on
Wednesday is expected to provide a small but much-needed
economic boost, even if cash-strapped consumers use some of the
extra money to pay down debt.    
    Canadian government bond prices were higher across the
maturity curve.
    The two-year price rose 6.5 Canadian cents to
yield 0.572 percent and the benchmark 10-year added
18 Canadian cents to yield 1.105 percent. The 10-year yield had
earlier touched its highest since June 24 at 1.174 percent.
    The curve steepened as the spread between the two-year and
10-year yields widened to 53.3 basis points, indicating
underperformance for longer-dated maturities.
    Canadian retail sales data for May and inflation data for
June are due on Friday.

 (Additional reporting by Fergal Smith; Editing by W Simon and
James Dalgleish)