CANADA FX DEBT-Canadian dollar falls as U.S.-China tensions threaten global outlook

 (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar declines 0.3% against the greenback
    * Price of U.S. oil increases 1.3%
    * Canada shed 226,700 nonfarm payroll jobs in April
    * Canadian bond yields were mixed across a flatter curve

    By Fergal Smith
    TORONTO, May 21 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as rising tensions
between the United States and China weighed on investor
sentiment, with the loonie paring some of this week's advance.
    Wall Street's main indexes eased from more than two-month
highs hit in the previous session as President Donald Trump said
the United States would react strongly if China imposes national
security laws for Hong Kong in response to last year's often
violent pro-democracy protests.             
    "There are increasing threats to global growth in the
deteriorating U.S.-China dialogue," said Adam Button, chief
currency analyst at ForexLive.
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so the loonie tends to
be sensitive to the global economic outlook. Investors also
worried about the pace of a recovery from a coronavirus-fueled
economic slump.    
    Bank of Canada Governor Stephen Poloz said the world was in
an era where interest rates were probably going to stay low and
would not go back to where they were 20 or 30 years ago.
    On Tuesday, the chief executive officer of Canada Mortgage
and Housing Corporation said that the national housing agency is
forecasting a decline in average house prices of as much as 18%
in the coming 12 months.
    "The dire forecast from the CMHC is causing some soul
searching in the Canadian dollar," Button said.
    The loonie          was trading 0.3% lower at 1.3944 to the
greenback, or 71.72 U.S. cents. The currency, which was up 1%
since the start of the week, traded in a range of 1.3891 to
    The decline for the loonie coincided with payroll services
provider ADP reporting that Canada shed 226,700 nonfarm payroll
jobs in April, when efforts to contain the coronavirus outbreak
shut down much of the economy.             
    Canada's retail sales report for March is due on Friday.
    The price of oil, one of Canada's major exports, rose to its
highest since March, supported by lower U.S. crude inventories,
OPEC-led supply cuts and recovering demand. U.S. crude oil
futures        settled 1.3% higher at $33.92 a barrel.
    Canadian government bond yields were mixed across a flatter
yield curve, with the 2-year            rising 2.6 basis points
to 0.333%.

 (Reporting by Fergal Smith; editing by Jonathan Oatis and Grant

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