October 5, 2016 / 9:32 PM / in 4 years

CANADA FX DEBT-C$ strengthens slightly as exports and oil climb

(Adds analyst comments, details on U.S. services sector data,
updates prices)
    * Canadian dollar ends at C$1.3182, or 75.86 U.S. cents
    * Loonie touches its weakest intraday in one week at
    * Bond prices lower across the yield curve
    * Ten-year yield touches its highest intraday in nearly two

    By Fergal Smith
    TORONTO, Oct 5 (Reuters) - The Canadian dollar strengthened
slightly against its U.S. counterpart on Wednesday as oil
climbed to a three-month high and domestic data showed a rise in
    Canada's trade deficit in August shrank to C$1.94 billion,
its lowest in eight months, on stronger non-energy exports. The
data offered further evidence the economy rebounded strongly in
the third quarter. 
    U.S. crude oil prices settled up $1.14 at $49.83 a
barrel, reaching their highest since June after the fifth
unexpected weekly drawdown in U.S. crude inventories added to
support on hopes that major producers will agree to cut output
next month. 
    The Canadian dollar benefited from higher oil prices and
some reduced pressure on the Bank of Canada to cut interest
rates, said Greg Anderson, global head of foreign exchange
strategy at BMO Capital Markets.   
    The implied probability of a Bank of Canada rate cut by
mid-2017 dipped to less than 25 percent. It was nearly 50
percent before data on Friday showed the economy grew more than
expected in July.
    The Canadian dollar ended at C$1.3182 to the
greenback, or 75.86 U.S. cents, slightly stronger than Tuesday's
close of C$1.3194, or 75.79 U.S. cents.
    The currency's strongest level of the session was C$1.3161,
while it touched its weakest point since Sept. 28 at C$1.3232. 
    Gains for the loonie were restrained as investors braced for
U.S. and Canadian employment data at the end of the week.
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries as U.S. services
industries grew at their fastest pace in 11 months in September.
    The two-year fell 4 Canadian cents to yield 0.577
percent and the benchmark 10-year declined 22
Canadian cents to yield 1.091 percent.
    The 10-year yield touched its highest intraday in nearly two
weeks at 1.141 percent.

 (Reporting by Fergal Smith; Editing by Bill Trott and James
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