November 23, 2018 / 8:43 PM / 18 days ago

CANADA FX DEBT-C$ weakens as oil price slump offsets domestic data

    * Canadian dollar falls 0.2 percent against greenback
    * Price of U.S. oil falls 7.7 percent
    * Canadian bond prices rise across a flatter yield curve
    * The loonie falls 0.6 percent for the week

    By Fergal Smith
    TORONTO, Nov 23 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday, as a further slide in
the price of oil offset domestic data showing above-target
inflation and increased retail sales.    
    Canada's annual inflation rate remained above the central
bank's target of 2 percent for the ninth straight month in
October and retail trade volumes climbed 0.5 percent in
September, data showed.             
    "This morning's data were a little bit better overall than
what was expected ... but they weren't enough, it was the
weakness in oil that dominated," said Mark Chandler, head of
Canadian fixed income and currency strategy at RBC Capital
Markets.
    The price of oil, one of Canada's major exports, slumped to
the lowest point in more than a year amid fears of a supply glut
even as major producers consider cutting output. U.S. crude oil
futures settled 7.7 percent lower at $50.42 a barrel.
            
    At 3:22 p.m. the Canadian dollar          was trading 0.2
percent lower at 1.3224 to the greenback, or 75.62 U.S. cents.
    The currency, which on Tuesday touched its weakest level in
nearly five months at 1.3318, traded in a range of 1.3185 to
1.3259. For the week, the loonie fell 0.6 percent.
    A large discount for Canadian heavy crude has added to the
headwinds for Canada's energy sector. Western Canadian Select
(WCS) traded last month as much as $52.50 per barrel below West
Texas Intermediate light oil, the biggest differential in data
going back to 2010, according to Shorcan Energy Brokers.
    Economists say that if the price received by Canadian
producers remains depressed, it could shave as much as 0.5
percent from Canada's economic growth next year.
    U.S. and Canadian stock markets were also pressured on
Friday by continued weakness in oil prices, while the U.S.
dollar        was boosted by declining risk appetite.
                        
    Canadian government bond prices were higher across a flatter
yield curve, with the two-year            up 2 Canadian cents to
yield 2.234 percent and the 10-year             rising 24
Canadian cents to yield 2.341 percent.
    The gap between Canada's 10-year yield and its U.S.
equivalent widened by 1.3 basis points to a spread of 70.5 basis
points in favor of the U.S. bond.

 (Reporting by Fergal Smith
Editing by Susan Thomas and Leslie Adler)
  
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