December 15, 2017 / 9:48 PM / in 4 months

CANADA FX DEBT-C$ slides vs firmer greenback after factory data disappoints

 (Adds analyst quotes and details throughout; updates prices)
    * Canadian dollar at C$1.2878, or 77.65 U.S. cents
    * Canadian manufacturing sales fall 0.4 percent in October
    * U.S. crude prices advance 0.5 percent
    * Bond prices mixed across a flatter yield curve

    By Fergal Smith
    TORONTO, Dec 15 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday after domestic data
showed a surprise drop in factory sales, while the greenback
climbed broadly on prospects of a U.S. tax overhaul.
    Manufacturing sales fell 0.4 percent in October, pulled down
by weak sales of autos and other transportation equipment.
Analysts had forecast a 0.8 percent increase.             
    The U.S. dollar        rose 0.5 percent against a basket of
major currencies on optimism a tax bill would be passed by
year-end.             
    The loonie got a boost on Thursday after Bank of Canada
Governor Stephen Poloz said in a speech the central bank was
increasingly confident the economy will need less stimulus over
time, although the currency gave up some gains after dovish
remarks by Poloz in a subsequent interview.
                        
    "Just looking at the way the Bank of Canada communicates,
it's not as clear, for instance, as the Fed," said Eric Viloria,
currency strategist at Wells Fargo. "That does contribute a bit
more in the price swings in the Canadian dollar."
    The Bank of Canada is leaving the door open to further
interest rate hikes in early 2018, making it clear that a number
of uncertainties that could derail the economy, such as NAFTA
renegotiation, are a reason for caution but not inaction.
            
    At 4 p.m. ET (2100 GMT), the Canadian dollar          was
trading at C$1.2878 to the greenback, or 77.65 U.S. cents, down
0.6 percent.
    The currency's strongest level of the session was C$1.2740,
while it touched its weakest since Tuesday at C$1.2890.
    For the week, the loonie dipped 0.2 percent.    
    The currency lost ground despite higher prices of oil, one
of Canada's major exports.
    U.S. crude prices        settled 0.5 percent higher at
$57.30 a barrel, supported by a pipeline outage in the North
Sea.             
    Speculators have trimmed bullish bets on the Canadian dollar
for eight of the last nine weeks, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed. As
of Dec. 12, net long positions had slipped to 41,960 contracts
from 42,466 a week earlier.
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 1.5 Canadian
cents to yield 1.555 percent and the benchmark 10-year
            rising 17 Canadian cents to yield 1.834 percent.
    The gap between Canada's 10-year yield and its U.S.
equivalent widened by 2.4 basis points to a spread of -51.5
basis points.

 (Reporting by Fergal Smith; Editing by James Dalgleish)
  
 
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