REFILE-CANADA FX DEBT-C$ weakens as oil falls, risk appetite fades

(Corrects day to Thursday in first paragraph)
    * Canadian dollar at C$1.2734, or 78.53 U.S. cents
    * Bond prices higher across a flatter maturity curve
    * 10-year yield hits lowest since Feb. 29 at 1.157 percent

    TORONTO, June 9 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as oil prices fell and
risk appetite faded.
    Losses for the loonie came one day after it strengthened to
a five-week high at C$1.2655 as expectations dwindled that the
U.S. Federal Reserve will move to hike interest rates again
    Oil prices fell as traders took profits after three sessions
of gains, though prices remained close to their highest this
year thanks to supply disruptions and a decline in U.S. crude
inventories. U.S. crude prices were down 1.25 percent to
$50.59 a barrel. 
    Slippage in global stocks provided an additional headwind
for the risk-sensitive commodity-linked Canadian dollar.
European shares fell for a second straight day, dragged
down by weakness in banking stocks as bond yields moved lower.
    At 9:44 a.m. EDT (1344 GMT), the Canadian dollar 
was trading at C$1.2734 to the greenback, or 78.53 U.S. cents,
weaker than Wednesday's close of C$1.2696, or 78.76 U.S. cents.
    The currency's strongest level of the session was C$1.2670,
while its weakest was C$1.2767. 
    Canadian industries ran at 81.4 percent of capacity in the
first quarter, up from 80.9 percent in the previous quarter and
new home prices in Canada rose 0.3 percent in April from March,
data from Statistics Canada showed.  
    Canadian employment data for May will be released on Friday.
The report comes after a massive wildfire last month cut
production in Alberta's oil sands region. 
    The Bank of Canada has said it expects damage from the
wildfire to shave 1.25 percentage points off economic growth in
the second quarter, which could put the quarter on pace for a
    Canadian government bond prices were higher across a flatter
maturity curve in sympathy with Treasuries. The two-year
 price rose 4 Canadian cents to yield 0.498 percent
and the benchmark 10-year climbed 42 Canadian cents
to yield 1.157 percent.
    The 10-year yield hit its lowest since Feb. 29 at 1.157

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)