November 16, 2016 / 2:32 PM / in a year

CANADA FX DEBT-C$ dips as oil pullback offsets manufacturing gain

* Canadian dollar at C$1.3462, or 74.28 U.S. cents
    * Bond prices lower across the yield curve
    * 10-year yield touches 11-month high at 1.602 percent

    TORONTO, Nov 16 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Wednesday as oil returned some
of the advances made in one of the year's biggest rallies a day
earlier, offsetting stronger-than-expected gains in domestic
manufacturing sales.
    The 0.3 percent increase for Canadian manufacturing sales in
September topped economists' expectations for a gain of 0.1
percent, though the rise was driven largely by the
transportation equipment sector and a rise in overall prices.
    
    U.S. crude prices were down 0.9 percent at $45.40 a
barrel after weekly U.S. crude stocks rose more than expected
and as a strong U.S. dollar weighed on commodities. 
    Oil is one of Canada's major exports.
    At 9:08 a.m. EDT (1408 GMT), the Canadian dollar 
was trading at C$1.3462 to the greenback, or 74.28 U.S. cents,
slightly weaker than Tuesday's close of $1.3447, or 74.37 U.S.
cents.
    The currency touched its strongest level since Thursday at
C$1.3424, while its weakest level of the session was C$1.3506.
    On Monday, the loonie touched its weakest in eight months at
C$1.3589. 
    Bank of Canada Deputy Governor Tim Lane is set to give a
speech on globalization from a Canadian perspective. The central
bank will release his prepared remarks at 11:50 a.m. EST (1650
GMT)
    The central bank recently downgraded its economic forecasts
and investors will look for further insight on the outlook for
exports and what the victory of U.S. President-elect Donald
Trump could mean for Canada.
    Canadian government bond prices were lower across the yield
curve, with the two-year down 0.5 Canadian cent to
yield 0.665 percent and the benchmark 10-year 
falling 9 Canadian cents to yield 1.549 percent.
    The 10-year yield touched its highest intraday level since
December at 1.602 percent amid investor expectations that Trump
will pursue policies that will boost inflation. Still, the yield
fell 1.3 basis points further below its U.S. equivalent to -71.3
basis points, the largest gap since February, as U.S. Treasuries
underperformed.    
    Canada's inflation report for October is due on Friday. The
annual inflation rate is forecast to rise to 1.5 percent,
bringing the rate closer to the Bank of Canada's 2 percent
target. 

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)

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