CANADA FX DEBT-Loonie notches weekly gain as investors look past bleak data

2020-05-29
 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar dips 0.1% against greenback
    * Loonie touches strongest intraday since March 12 at 1.3714
    * Canada's April GDP falls 11% in flash estimate
    * Canadian bond yields decline across flatter curve

    By Fergal Smith
    TORONTO, May 29 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Friday but largely kept hold of
this week's rally as investors took in stride bleak domestic GDP
data and looked ahead to a policy decision next week from the
Bank of Canada.
    The loonie          was trading 0.1% lower at 1.3775 to the
greenback, or 72.60 U.S. cents. The currency touched its
strongest intraday level since March 12 at 1.3714.
    For the week, the loonie was up 1.6% as investors grew more
optimistic about economic recovery, while it ended higher for
the second straight month.
    Canada's GDP fell at an annualized rate of 8.2% in the first
quarter and an estimated 11% month-over-month in April, when the
coronavirus outbreak shuttered non-essential businesses across
the country. [            
    "Our expectation is for a 40% plunge in Q2 as the economy is
devastated by the lockdowns," said Ryan Brecht, a senior
economist at Action Economics. "The easing of those measures so
far in May suggests that the economy bottomed out in April."
    The price of oil, one of Canada's major exports, was
bolstered by growing fuel demand even as investors worried about
worsening Washington-Beijing relations. U.S. crude oil futures
       settled 5.3% higher at $35.49 a barrel.
    A Bank of Canada interest rate decision is set for next
Wednesday, when Tiff Macklem will take over as governor. The
current governor, Stephen Poloz, is due to retire next Tuesday. 
    "Poloz on the way out has generally been quite optimistic,"
said Amo Sahota, director at Klarity FX in San Francisco. "Are
we going to get a change in tone?"
    Canada's central bank will hold interest rates at a record
low of 0.25% until at least the end of next year, a Reuters poll
showed.             
    Canada's 10-year government bond yield             eased 2.4
basis points to 0.536%.

 (Reporting by Fergal Smith
Editing by Paul Simao and Grant McCool)
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