September 12, 2016 / 8:52 PM / 4 years ago

CANADA FX DEBT-C$ pares losses as oil rises, Fed rate hike bets dip

(Adds analyst quote and details on Fed rate hike probability,
trade deal with European Union, updates prices)
    * Canadian dollar ends at C$1.3049, or 76.63 U.S. cents
    * Loonie touches its weakest since Sept. 1 at C$1.3123
    * Bond prices mixed across the maturity curve

    By Fergal Smith
    TORONTO, Sept 12 (Reuters) - The Canadian dollar pared some
losses against the U.S. dollar  on Monday, rebounding from an
earlier 11-day low as oil rose and bets on a Federal Reserve
interest rate hike were scaled back.
    Growing concerns that global central banks' commitment to
monetary policy stimulus may be waning have weighed on
risk-sensitive assets and currencies, such as the Canadian
dollar, over the past few days. But U.S stock prices rebounded
on Monday after Fed policymakers expressed caution about the
need to raise U.S. interest rates. 
    Those "dovish sounding comments" helped support the Canadian
dollar, said Robert Kavcic, senior economist at BMO Capital
    The probability of a Fed rate hike in September fell to 15
percent from 24 percent on Friday, according to CME Group's
FedWatch tool.    
    U.S. crude oil futures settled up 41 cents at $46.29
a barrel, helped by a softer U.S. dollar and stronger U.S.
equity markets. 
    Oil is one of Canada's major exports.
    Canada is working towards signing a new trade agreement with
the European Union in October, Canadian Trade Minister Chrystia
Freeland told the Toronto Global Forum.  
    The Canadian dollar ended at C$1.3049 to the
greenback, or 76.63 U.S. cents, slightly weaker than Friday's
close of C$1.3037, or 76.70 U.S. cents.
    The currency's strongest level of the session was C$1.3035,
while it touched its weakest since Sept. 1 at C$1.3123.    
    The loonie's modest losses followed a more
dovish-than-expected statement from the Bank of Canada last
    Data on Friday showed Canada created more jobs than expected
in August on increased hiring in the construction and services
sectors, but the gains did not fully make up for recent declines
in employment. 
    Speculators have pared bullish bets on the Canadian dollar,
Commodity Futures Trading Commission data showed on Friday.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year bond down 0.5
Canadian cent to yield 0.586 percent and the benchmark 10-year
 flat to yield 1.151 percent.
    Earlier in the session, the 10-year yield touched its
highest since June 21 at 1.204 percent.    
    Domestic manufacturing sales data for July is due for
release on Friday. Strong sales at the start of the third
quarter would likely reinforce expectations that the economy
will bounce back strongly after shrinking in the second quarter.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Grant
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