By Frank Pingue
TORONTO, Nov 29 (Reuters) - The Canadian dollar finished lower versus the greenback on Thursday as oil prices unwound big gains and weak economic data left the currency on the verge of falling below parity with the U.S. dollar.
Canadian bond prices rose early after softer-than-expected Canadian data and managed to hang on to the gains ahead of the release of key third-quarter gross domestic product data on Friday.
The Canadian dollar closed at US$1.0028, valuing each U.S. dollar at 99.72 Canadian cents, down from US$1.0140, or 98.61 Canadian cents, at Wednesday's session close.
Oil prices surged more than $4 to over $95 a barrel after an explosion crippled an Enbridge Inc (ENB.TO: Quote, Profile, Research) pipeline that carries Canadian crude exports to the United States.
But oil prices fell from session highs after Enbridge said it expects to quickly restart its pipeline system. The commodity-linked Canadian dollar followed prices lower and nearly ducked below parity for the second time this week.
It fell as low as US$1.0005, or 99.95 Canadian cents.
Also dragging on the Canadian dollar were a pair of economic reports that came in weaker than expected and extended a recent string of soft data.
"During the course of the session oil came back sharply, and that took (the U.S. dollar) back toward parity," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"The data also weakened the trend on the Canadian dollar and basically highlighted the adverse impact of the strong Canadian dollar as well as the weaker U.S. economy on the Canadian economy."
Canada's current account surplus fell in the third quarter to C$1.04 billion, well below forecasts for a surplus of C$3.4 billion. Canadian industrial product prices fell 1.1 percent in October, missing forecasts for a 0.8 percent fall.
The market will now turn its attention to the Canadian third-quarter gross domestic product report due on Friday, which will be the last piece of data the Bank of Canada will have to consider ahead of its Dec. 4 interest rate announcement.
A recent Reuters poll showed the market is mostly divided on whether the bank will cut its key overnight rate by 25 basis points next week.
Canadian bond prices bounced back from two straight losing sessions as the economic data convinced investors to venture back into secure assets such as government debt.
Friday's GDP data could be a factor in how bond prices perform ahead of the weekend.
The two-year bond gained 20 Canadian cents to C$101.12 to yield 3.663 percent. The 10-year bond rose 73 Canadian cents to C$100.22 to yield 3.972 percent.
The yield spread between the two-year and 10-year bond moved to 30.9 basis points from 30.3 basis points at the previous close.
The 30-year bond surged C$1.36 to C$114.50 to yield 4.144 percent. In the United States, the 30-year Treasury yielded 4.3430 percent.
The three-month when-issued T-bill yielded 3.95 percent, up from 3.93 percent at the previous close.
(Reporting by Frank Pingue; Editing by Peter Galloway)