May 28, 2020 / 7:59 PM / a month ago

CANADA FX DEBT-Canadian dollar lags G10 currencies as investors dread GDP data

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar dips 0.2% against the greenback
    * Canada's current account deficit widens to C$11.1 billion
    * Price of U.S. oil increases 2.7%
    * Canadian bond yields rise across the curve

    By Fergal Smith
    TORONTO, May 28 (Reuters) - The Canadian dollar was the only
G10 currency to lose ground against the greenback on Thursday as
data showed a widening in Canada's current account deficit and
ahead of data that was expected to show a slump in Canada's
    The loonie        was trading 0.2% lower at 1.3779 to the
greenback, or 72.57 U.S. cents. Still, the currency has
rebounded more than 6% since hitting a four-year low in March.
    "It has come a long way," said Mark Chandler, head of
Canadian fixed income and currency strategy at RBC Capital
Markets. "A lot of people were perplexed by the strength up to
this point."
    Some of the cause of the loonie's underperformance on
Thursday was due to a wider-than-expected current account
deficit, Chandler added.
    The current account deficit widened to C$11.1 billion in the
first quarter from a revised C$9.3 billion in the fourth
quarter, on a higher trade in goods and services deficit,
Statistics Canada said.             
    A wider current account deficit could leave the loonie more
sensitive to moves in the global flow of capital.    
    Data on first-quarter and March GDP are due on Friday.    
Economists expect that Canada's economy contracted by an
annualized rate of 10% in the first quarter, while an even
deeper slump is anticipated in the second quarter after
businesses across the country were closed to help contain the
spread of the coronavirus pandemic.
    "I do believe there may be some trepidation about GDP,"
Chandler said. He expects second-quarter GDP to shrink at an
annualized rate of 40%.
    The price of oil, one of Canada's major exports, erased
earlier losses on signs U.S. gasoline demand is rising. U.S.
crude oil futures        settled 2.7% higher at $33.71 a barrel.
    Canadian government bond yields rose across the curve, with
the 10-year             up 1.9 basis points at 0.567%.

 (Reporting by Fergal Smith; Editing by Andrea Ricci)
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