July 25, 2019 / 8:57 PM / 25 days ago

CANADA FX DEBT-C$ falls as investors favor higher yielding greenback

 (Adds strategist quote and details throughout, updates prices)
    * Canadian dollar weakens 0.2% against the greenback
    * Canadian average weekly earnings increase 3.4%
year-over-year
    * Oil prices gain 0.3%
    * Bond prices move lower across the yield curve

    By Levent Uslu
    TORONTO, July 25 (Reuters) - The Canadian dollar weakened to
a near one-month low against the greenback on Thursday as
interest rate differentials moved further in favor of the U.S.
currency.
    At 3:49 p.m. EDT (1949 GMT), the Canadian dollar         
was trading 0.2% lower at 1.3161 to the greenback, or 75.98 U.S.
cents. The currency notched its weakest intraday level since
July 26 at 1.3167.
    "It's not too surprising for the Canadian dollar to lose
some ground given that we are seeing some widening out in the
interest rate differentials between the U.S. and Canada," said
Shaun Osborne, chief currency strategist at Scotiabank.    
    Canada's 2-year yield touched its lowest intraday level
since June 26 at 1.397%, while the gap between the 2-year yield
and its U.S. counterpart widened by 1.3 basis points to a spread
of 41.1 basis points in favor of the U.S. bond, the biggest gap
since June 18.
    The wider yield spread comes following data since Friday
showing weaker-than-expected retail sales and wholesale trade
data for May.                         
    The loonie lost ground despite a higher price for oil, one
of Canada's major exports. U.S. crude oil futures        settled
up 0.3% at $56.02 a barrel, supported by rising tensions between
the West and Iran and a big decline in U.S. crude stockpiles,
but gains were capped due to lingering worries about slowing
economic growth that could reduce fuel demand.             
    Meanwhile, data from Statistics Canada showed that average
weekly earnings of nonfarm payroll employees were up 3.4% from
the previous year, the highest year-over-year growth rate since
February 2018.
    The upward move in weekly earnings was accompanied by an
increase of 32,600 in the number of nonfarm payroll employees.
    Canadian government bond prices were lower across the yield
curve in sympathy with U.S. Treasuries and German Bunds after
European Central Bank President Mario Draghi said the bank sees
a low risk of a recession in the euro zone.             
    The 2-year            fell 3 Canadian cents to yield 1.443%
and the 10-year             was down 19 Canadian cents to yield
1.464%.

 (Reporting by Levent Uslu; editing by Jonathan Oatis)
  
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