October 2, 2017 / 8:28 PM / in 16 days

Canadian dollar retreats against firmer greenback as oil prices slide

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday after a drop in the price of oil, one of Canada’s major exports, and a broad rise for the greenback.

Data showing that U.S. factory activity surged to a more than 13-year high in September helped lift the U.S. dollar .DXY against a basket of major currencies, while a violence-marred independence vote in Spain’s Catalonia region weighed on the euro.

“It (the Canadian dollar) seems to be following the general theme of (U.S.) dollar strength for today,” said Bipan Rai, senior macro strategist at CIBC Capital Markets.

“With the market net long Canadian dollars, it makes sense that some of those positions are being cleared out in this move.”

Speculators have raised bullish bets on the loonie to their highest since November 2012, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday.

U.S. crude oil CLc1 settled 2.1 percent lower at $50.58 a barrel as a rise in U.S. drilling and higher output from the Organization of the Petroleum Exporting Countries put the brakes on a rally that brought the biggest third-quarter price gain in 13 years.

At 4 p.m. (2000 GMT), the Canadian dollar CAD=D4 was trading at C$1.2513 to the greenback, or 79.92 U.S. cents, down 0.4 percent.

The currency traded in a range of C$1.2466 to C$1.2524. It touched a four-week high at C$1.2531 on Friday, when data showing that Canada’s economy stalled in July further dampened prospects of another interest rate hike by the central bank this month.

The Bank of Canada raised rates in July and September after the country’s growth accelerated in the first half of the year, but speeches by the bank’s policymakers have helped talk down the Canadian dollar in recent weeks after the currency’s strength put growth at risk.

Canadian government bond prices were lower across a steeper yield curve, with the two-year CA2YT=RR down 2.5 Canadian cents to yield 1.533 percent and the 10-year CA10YT=RR falling 25 Canadian cents to yield 2.129 percent.

Last week, the 10-year yield touched a three-year high at 2.202 percent.

Central bank Deputy Governor Sylvain Leduc will speak on Tuesday on productivity in the Canadian economy.

Canada’s trade data for August is due on Thursday, and the September employment report is scheduled for release on Friday.

Reporting by Fergal Smith; Editing by Lisa Von Ahn and Peter Cooney

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