CANADA FX DEBT-C$ weaker in risk-off move after U.S. drops bomb

    * Canadian dollar settles at C$1.3328, or 75.05 U.S. cents
    * Loonie reverses after touching strongest since Feb. 28
    * Bond prices mixed across flatter yield curve
    * 10-year, 20-year yields hit nearly 5-month low

    By Morgan Sharp
    TORONTO, April 13 (Reuters) - The Canadian dollar turned
weaker on Thursday after hitting a 6-week high, with investors
selling the loonie as geopolitical tensions took on more
significance after news that the United States had dropped a
massive bomb in Afghanistan.
    The currency had earlier been boosted by higher oil prices
and domestic manufacturing sales that fell less than expected.
    "Today we're being whipsawed by geopolitical risk,
specifically the news about the bomb in Afghanistan," said Mazen
Issa, a senior currency strategist at TD Securities.
    The U.S. military said it dropped "the Mother of All Bombs,"
the largest non-nuclear device it has ever unleashed in combat,
on a network of caves and tunnels used by Islamic State in
eastern Afghanistan on Thursday.             
    The fall for the Canadian currency also came as the U.S.
dollar rebounded from a heavy hit after U.S. President Donald
Trump said the greenback was getting too strong and that he
would prefer the Federal Reserve to keep interest rates low.
    The Canadian dollar          settled at C$1.3328 to the
greenback, or 75.05 U.S. cents, weaker than the Bank of Canada's
official close on Wednesday of C$1.3273, or 75.34 U.S. cents.
    It gained 0.6 percent over the week, helped by a less dovish
tone out of the Bank of Canada on Wednesday.             
    Canadian markets will be closed on Friday for the Good
Friday holiday.
    Prices of oil, one of Canada's major exports, were little
changed after a strong week of gains in which crude benchmarks
recouped most of March's losses.      
    Canadian manufacturing sales fell 0.2 percent in February
after three consecutive months of increases, weighed down by
declines in the vehicle assembly sector, data from Statistics
Canada showed.
    The decrease was not as steep as the 0.7 percent decline
economists had expected, while sales volumes rose 0.1 percent.
    "Canadian manufacturing is still on an upward trajectory,
and will contribute solidly to GDP growth" said Bill Adams,
senior international economist at The PNC Financial Services
Group in a research note.
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down half a cent to
yield 0.728 percent and the 10-year             price up 10
Canadian cents to yield 1.494 percent, its lowest since
    The 20-year issue and U.S. benchmark yields also hovered
near a five-month trough.             

 (Additional reporting by Fergal Smith; Editing by Bernard Orr
and James Dalgleish)