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Canadian dollar falls 0.1% against the greenback

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Touches its weakest since May 2020 at 1.4105

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Factory sales decrease 0.5% in September

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Bond yields ease across the curve

By Fergal Smith

TORONTO, Nov 15 (Reuters) - The Canadian dollar weakened

to a 4-1/2 year low against its U.S. counterpart on Friday as

oil prices fell and a wider gap between U.S. and Canadian yields

reduced the incentive for investors to hold the currency.

The loonie was trading 0.1% lower at 1.4075 to the

U.S. dollar, or 71.05 U.S. cents, after touching its weakest

intraday level since May 2020 at 1.4105.

For the week, the currency was down 1.2%, its sixth weekly

decline in the last seven weeks.

"The CAD's principal headwind comes from spreads ... with

short-term cash and swaps spreads having widened significantly

in the USD's favour in the wake of U.S. election," Shaun

Osborne, chief currency strategist at Scotiabank, said in a

note.

The gap between the Canadian 2-year yield and its U.S.

equivalent widened by 5.5 basis points to roughly 115 basis

points in favor of the U.S. note, near its widest since 1997.

Investors tend to favor higher yielding currencies.

Upbeat U.S. retail sales data contributed to traders paring

back expectations that the Federal Reserve would cut interest

rates in December, while the potential for higher inflation

under the incoming Trump administration has tempered

expectations for Fed easing in 2025.

Domestic data for September was mixed. It showed factory

sales falling 0.5% from the previous month and wholesale trade

up 0.8%. Data for October showed home sales jumping 7.7%, adding

to the rise in activity since the Bank of Canada began cutting

interest rates in June.

The price of oil, one of Canada's major exports, fell

1.4% to $67.73 a barrel and was bound for a weekly loss as

investors digested waning Chinese demand.

Canadian bond yields edged lower across the curve, with the

10-year down 1.2 basis points at 3.272%.