June 22, 2018 / 2:15 PM / in 4 months

CANADA FX DEBT-C$ steadies after hitting 1-year low; rate hike bets ebb

    * Canadian dollar at C$1.3314, or 75.11 U.S. cents
    * Loonie touches its weakest in one-year at C$1.3384
    * Price of U.S. oil rises 2.7 percent    
    * Bond prices higher across a steeper yield curve

    By Fergal Smith
    TORONTO, June 22 (Reuters) - The Canadian dollar steadied
against its U.S. counterpart on Friday after hitting an earlier
one-year low, as investors pared bets on a Bank of Canada
interest hike next month after weaker-than-expected domestic
inflation and retail sales data.
    Canada's annual inflation rate stayed unchanged at 2.2
percent in May, Statistics Canada data indicated, less than the
2.5 percent forecast by analysts.             
    Canadian retail sales in April dropped by 1.2 percent, in
part due to bad weather that hit sales of autos and gardening
equipment. Economists had predicted no change.             
    "It is just not a good batch of data," said Andrew Kelvin,
senior rates strategist at TD Securities. "Markets are probably
interpreting this correctly."    
    Chances of a Bank of Canada hike at the July 11 announcement
fell to 54 percent from 69 percent before the data, the
overnight index swaps market indicated.           
    At 9:23 a.m. EST (1323 GMT), the Canadian dollar         
was trading nearly unchanged at C$1.3314 to the greenback, or
75.11 U.S. cents. The currency touched its weakest intraday
level since June 12, 2017 at C$1.3384.    
    The loonie has also been pressured this week by slow-moving
talks to revamp the North American Free Trade Agreement and an
uncertain outlook for global trade.
    But U.S. stocks rose on Friday in the absence of any
significant developments in the China-U.S. trade fight.
    Canada runs a current account deficit so its currency tends
to benefit from improved risk appetite.    
    The price of oil, one of Canada's main exports, rose as OPEC
agreed to a modest increase in output to compensate for losses
in production at a time of rising global demand.             
    U.S. crude        prices were up 2.7 percent at $67.29 a
barrel.
    Canadian government bond prices were higher across a steeper
yield curve, with the two-year            up 5.5 Canadian cents
to yield 1.797 percent and the 10-year             rising 11
Canadian cents to yield 2.128 percent.
    The 2-year yield fell 4.3 basis points further below its
U.S. equivalent to a spread of -75.7 basis points, its widest
gap since March 2007.
    On Thursday, the Bank of Canada released its quarterly bond
schedule. It plans to auction nine regular issues of Government
of Canada bonds and one issue of real return bonds.

 (Reporting by Fergal Smith
Editing by Phil Berlowitz)
  
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