CANADA FX DEBT-C$ weakest close in over a decade, hit by data, oil

(Recasts with currency moves, closing figures, strategist
    * Canadian dollar at C$1.3080 or 76.45 U.S. cents
    * Weakest finish since Aug. 2004
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, July 31 (Reuters) - The Canadian dollar finished
the session at its weakest level in more than a decade against
the U.S. dollar on Friday, burdened by U.S. crude prices that
had their biggest monthly fall since 2008 and figures that
showed the Canadian economy shrank in May for the fifth straight
    The economy unexpectedly shrank by 0.2 percent in May from
April, the latest sign Canada was likely in recession in the
first half of the year. 
    The loonie was also weighed by another decline in prices for
oil, a major Canadian export, squeezed by supply glut worries
after the OPEC cartel indicated there would be no cuts in
    U.S. crude, which posted its biggest monthly drop
since 2008 by falling 21 percent in July, settled down nearly 3
percent at $48.21 a barrel. Brent crude lost 2 percent
to end at $52.21. 
    The Canadian dollar ended the session at C$1.3080
to the U.S. dollar, or 76.45 U.S. cents, its weakest finish
since August 2004 and softer than the Bank of Canada's official
close of C$1.3010, or 76.86 U.S. cents, on Thursday. 
    The currency, which lost some 4.7 percent in July, swung
widely between C$1.2940 and C$1.3099 during the session and was
among the day's biggest underperformers.
    The weakness came even as the greenback fell against a
basket of major currencies on figures that showed employment
costs, the broadest measure of labor costs, recorded its
smallest increase in 33 years. This drove markets to pare bets
on predictions the U.S. Federal Reserve will resume raising
interest rates as early as September. 
    "We've only got very few data points left between now and
Sept. We're really threading the eye of the needle here.
Everything's got to be dead-on," said Amo Sahota, director at
Klarity FX in San Francisco.
    Despite Friday's data, the overall expectation is still for
the Fed to hike interest rates sometime in the coming months, in
complete contrast to the Bank of Canada, which just finished
delivering its second rate cut this year.
    "(It's) choppy ... but everybody still knows that ultimately
(U.S.) rates are still going up," said Sahota. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 9 Canadian
cents to yield 0.409 percent and the benchmark 10-year
 rising 48 Canadian cents to yield 1.441 percent.
    The Canada-U.S. two-year bond spread narrowed to -26 basis
points, while the 10-year spread narrowed to -74.6 basis points.

 (Reporting by Solarina Ho; editing by Peter Galloway)