September 21, 2017 / 1:33 PM / 3 years ago

CANADA FX DEBT-C$ dips with oil; pares losses after domestic data

    * Canadian dollar at C$1.2346, or 81.00 U.S. cents
    * Bond prices little changed across the yield curve

    By Fergal Smith
    TORONTO, Sept 21 (Reuters) - The Canadian dollar weakened on
Thursday against its U.S. counterpart as oil prices fell, but
pared some losses after domestic data showed much
stronger-than-expected growth in wholesale trade.
    The 1.5 percent increase in July wholesale trade exceeded
economists' forecasts for a decline of 0.9 percent and was the
biggest increase since January, data from Statistics Canada
showed. Stripping out the effects of price changes, volumes were
even stronger, up 2.1 percent.
    The strength of the data has boosted the outlook for growth
in the economy for the month, offsetting soft manufacturing
data, Nick Exarhos, an economist at CIBC Capital Markets, said
in a research note.
    Economists will turn to Canada's retail sales report, due on
Friday, for further clues on prospects for July gross domestic
product. The country's August inflation report is also due on
    Prices of oil, one of Canada's major exports, gave up some
recent gains before a meeting of oil producers that could extend
production limits aimed at clearing a glut.             
    U.S. crude        prices were down 0.47 percent at $50.45 a
    At 9:14 a.m. ET (1314 GMT), the Canadian dollar          was
trading at C$1.2346 to the greenback, or 81.00 U.S. cents, down
0.2 percent.
    The currency traded in a range of C$1.2323 to C$1.2368.
    On Wednesday, the loonie hit a 2-week low at C$1.2390 after
the Federal Reserve signaled that it expected to raise interest
rates once more by year-end.
    Mexico and Canada will survive current talks with the United
States on trade relatively unscathed, according to a Reuters
poll of economists, suggesting U.S. President Donald Trump's
protectionist threats still have more bark than bite.
    Canadian government bond prices were little changed across
the yield curve, with the two-year            up 0.5 Canadian
cent to yield 1.578 percent and the 10-year             rising 2
Canadian cents to yield 2.103 percent.
    The 10-year yield hovered below a nearly three-year high of
2.119 percent reached earlier this week.
    Still, global investors are warming up to Canadian bonds and
their newly attractive yields, saying there is a limit to how
much the Bank of Canada can diverge from its peers after its two
interest rate hikes this year.                 

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)
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