CANADA FX DEBT-C$ weakens to one-week low as oil tumbles

Mon Aug 22, 2016 4:31pm EDT
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(Adds analyst quotes, updates prices)
    * Canadian dollar at C$1.2950, or 77.22 U.S. cents
    * Loonie touches its weakest since Aug. 15 at C$1.2965
    * Bond prices higher across a flatter maturity curve

    By Fergal Smith
    TORONTO, Aug 22 (Reuters) - The Canadian dollar weakened to
a one-week low against its U.S. counterpart on Monday as lower
oil prices offset solid domestic data, but losses were
restrained as investor attention turned to a speech by Federal
Reserve Chair Janet Yellen on Friday.
    Hesitation ahead of Yellen's speech capped gains for the
U.S. dollar against a basket of major currencies a day
after a top Federal Reserve official made comments perceived as
    "I think it's going to be pretty directionless for the
remainder of this week until we get through to Friday (when
Yellen speaks)," said Mark Chandler, head of Canadian fixed
income and currency strategy at RBC Capital Markets.
    "There is a big question market on what we might get (from
Yellen)," Chandler added, noting the inconsistency of recent
comments by Fed officials. 
    U.S. crude oil futures settled down $1.47 at $47.05 a barrel
on worries about burgeoning Chinese fuel exports, more Iraqi and
Nigerian crude shipments and a rising U.S. oil rig count. 
    Canadian wholesale trade increased by 0.7 percent in June
from May, the third consecutive monthly gain. Analysts surveyed
by Reuters had forecast a 0.1 percent increase. 
    The Canadian dollar closed at C$1.2950 to the
greenback, or 77.22 U.S. cents, weaker than Friday's official
close of C$1.2858, or 77.77 U.S. cents.
    The currency's strongest level of the session was C$1.2874,
while it touched its weakest since Aug. 15 at C$1.2965.
    On Friday, the loonie snapped a nearly two-week winning
streak as domestic retail sales data disappointed. 
    Speculators reduced bullish bets on the Canadian dollar for
a third straight week, Commodity Futures Trading Commission data
showed on Friday. Net long Canadian dollar positions fell to
12,473 contracts in the week ended Aug. 16 from 15,366 contracts
in the prior week. 
    Canadian government bond prices were higher across the
maturity curve in sympathy with U.S. Treasuries as a jump in an
index of equity market volatility supported demand for
safe haven assets.
    Canadian government bond prices were higher across the
maturity curve, with the two-year bond up 3.5
Canadian cents to yield 0.555 percent and the benchmark 10-year
 rising 50 Canadian cents to yield 1.025 percent.    
    The curve flattened as the spread between the 2-year and
10-year yields narrowed by 3.5 basis points to 47 basis points,
indicating outperformance for longer-dated maturities.
    On Thursday, the spread hit its narrowest since June 2008 at
46.8 basis points.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)