CANADA FX DEBT-C$ weakens as oil falls, U.S. rate hike bets rise
* Canadian dollar at C$1.3135, or 76.13 U.S. cents * Bond prices lower across maturity curve TORONTO, Sept 1 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Thursday as oil prices fell and investors raised bets on a Federal Reserve interest rate hike as soon as this month. U.S. data pointed to sustained labor market strength that could push the Fed closer to raising rates, and the U.S. dollar firmed against a basket of major currencies, with some investors positioning for Friday's non-farm jobs report. The probability of a Fed rate increase in September climbed to 30 percent from 24 percent on Wednesday, according to the CME Group's FedWatch calculation based on U.S. short-term interest rate futures. U.S. crude prices were down 1.32 percent at $44.11 a barrel even after Saudi Arabia said OPEC was moving towards a common position on oil production that some investors believe could support prices. At 9:23 a.m. EDT (1323 GMT), the Canadian dollar was trading at C$1.3135 to the greenback, or 76.13 U.S. cents, weaker than Wednesday's close of C$1.3116, or 76.24 U.S. cents. The currency's strongest level of the session was C$1.3093, while its weakest was C$1.3140. On Wednesday, the loonie touched a three-week low at C$1.3145. Losses for the Canadian dollar came after data on Wednesday showed the country's economy contracted more in the second quarter than the Bank of Canada had projected. Still, figures for June showed signs that a pickup was already underway and investors are betting that the Bank of Canada will leave its policy rate unchanged at next week's interest rate decision. Canadian government bond prices were lower across the maturity curve in sympathy with U.S. Treasuries. The two-year bond dipped 0.5 Canadian cent to yield 0.585 percent and the benchmark 10-year declined 12 Canadian cents to yield 1.036 percent. The 10-year yield fell 3.4 basis points further below its U.S. counterpart, with the spread hitting -57.8 basis points, its largest gap since March 30, as Treasuries underperformed. Chinese and Canadian firms signed 56 deals worth more than C$1.2 billion ($914.8 million) at a ceremony on Thursday, Canadian trade minister Chrystia Freeland said in Shanghai. Austria is ready to confront other European Union members states over its opposition to a free trade deal with Canada, Chancellor Christian Kern said, because it sees it containing many of the same problems as one being negotiated with the United States. (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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