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CANADA FX DEBT-C$ weakens, retaining defensive bias as economy stalls

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* Canadian dollar at C$1.3653, or 73.24 U.S. cents

* Bond prices slightly lower across the yield curve


By Fergal Smith

TORONTO, April 28 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday, retaining this week's defensive bias as domestic data showed the economy stalled in February, offsetting a rebound in oil prices.

Canadian gross domestic product was flat in February, matching the forecast by analysts in a Reuters poll, after robust growth in January. "It is a soft month in an otherwise solid quarter," said Derek Holt, head of capital markets economics at Scotiabank.

Oil prices rose after dropping to a one-month low the previous day, prompting investors to buy at cheaper levels ahead of a May Organization of the Petroleum Exporting Countries meeting at which producers could extend output cuts. At 9:01 a.m. ET (1301 GMT), the Canadian dollar was trading at C$1.3653 to the greenback, or 73.24 U.S. cents, weaker than Thursday's close of C$1.3624, or 73.40 U.S. cents.

The currency traded in a range of C$1.3625 to C$1.3666.

On Thursday, the loonie touched a fresh 14-month low at C$1.3670. It is on course to fall 1.1 percent this week, pressured by recent weakening in oil prices and a more uncertain outlook for the North American Free Trade Agreement. Canadian government bond prices were slightly lower across the yield curve in sympathy with U.S. Treasuries. The two-year dipped 1.5 Canadian cents to yield 0.742 percent and the 10-year declined 5.2 Canadian cents to yield 1.581 percent.

On Thursday, the 10-year yield touched a three-week high at 1.621 percent.


(Reporting by Fergal Smith; Editing by Nick Zieminski)

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