December 5, 2016 / 2:52 PM / in a year

CANADA FX DEBT-C$ edges higher as oil builds on recent rally

* Canadian dollar at C$1.3273, or 75.34 U.S. cents
    * Bond prices lower across the yield curve

    TORONTO, Dec 5 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Monday after sharp gains the
previous week, as oil rose and domestic attention shifted to an
interest rate decision by the Bank of Canada.
    The loonie advanced 1.8 percent last week, its biggest gain
in eight months, helped by stronger-than-expected domestic data
and an agreement by members of the Organization of the Petroleum
Exporting Countries to cut output.
    Oil, one of Canada's major exports, extended its gains since
the production cut deal was struck. U.S. crude prices
were up 0.87 percent at $52.13 a barrel. 
    The U.S. dollar weakened against a basket of major
currencies as bets that a snap election in Italy would not be
triggered supported the euro. 
    The Bank of Canada is widely expected to hold interest rates
at 0.50 percent on Wednesday, but investors will look to the
policy statement for any mention of what impact the U.S.
election of Donald Trump could have on the Canadian and U.S.
economies.
    At 9:34 a.m. EST (1434 GMT), the Canadian dollar 
was trading at C$1.3273 to the greenback, or 75.34 U.S. cents,
slightly stronger than Friday's close of C$1.3283, or 75.28 U.S.
cents.
    The currency's weakest level of the session was C$1.3356,
while its strongest was C$1.3269. On Friday, it touched its
strongest since Oct. 21 at C$1.3254.    
    Speculators increased bearish bets on the Canadian dollar,
according to Commodity Futures Trading Commission data on
Friday. Net short Canadian dollar positions rose to 18,576
contracts in the week ended Nov. 29 from 17,462 in the prior
week. 
    The Liberal government's new mortgage rules are likely to
sober up Canada's housing market over the coming year, a Reuters
poll showed, but record-low borrowing costs should bolster
demand. 
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year down 3.5 Canadian
cents to yield 0.752 percent and the benchmark 10-year
 falling 36 Canadian cents to yield 1.66 percent.
    On Thursday, the 10-year yield touched its highest in more
than one year at 1.712 percent.
    Canada's trade data for October is due on Tuesday.
Better-than-expected figures for exports could bolster
expectations that economic growth in the final quarter of the
year will not slow by as much as had been anticipated. 

 (Reporting by Fergal Smith; Editing by Nick Zieminski)

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