CANADA FX DEBT-C$ finds support from firmer oil, stocks

Fri Sep 21, 2012 9:47am EDT
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* C$ at $0.9747 vs US$, or $1.0260
    * Tame Canada inflation data has little impact
    * Little pressure on Bank of Canada to raise rates
    * Bond prices mixed

    By Solarina Ho
    TORONTO, Sept 21 (Reuters) - The Canadian dollar was firmer
against its U.S. counterpart on Friday, with stronger oil and
other commodity prices providing support even as tame inflation
data suggested the Bank of Canada will be in no hurry to raise
interest rates.
    North American shares clawed their way back up and oil
rebounded from a 1-1/2 month low with investors encouraged by
hopes Spain is gearing up to accept European Union and European
Central Bank aid. 
    This overshadowed news that Canada's annual inflation rate
in August slipped to 1.2 percent from 1.3 percent in July, well
below the central bank's 2 percent target. Analysts polled by
Reuters has forecast the rate would say at 1.3 percent.
    "The annual rates remaining below the mid-range target (and)
the Bank of Canada's scope to focus on growth suggest little
prospect of any imminent rise in interest rates," said Paul
Ferley, assistant chief economist at Royal Bank of Canada. 
    The central bank started signaling in April it might raise
rates if the economy continued to grow.
    At 9:17 a.m. (1317 GMT), Canada's dollar stood at
C$0.9747 against the U.S. dollar, or $1.0260, firmer than
Thursday's North American finish at C$0.9765, or $1.0241.
    Equity markets also supported the Canadian dollar, with both
Canadian and U.S. stock markets climbing at the open.  
    Matt Perrier, a director of foreign exchange sales at BMO
Capital Markets, said key levels to watch on Friday were
C$0.9725 and C$0.9795.
    Helping the upbeat mood were signs that Spain is slowly
moving towards requesting financial assistance. The government
is considering freezing pensions and speeding up a planned rise
in the retirement age to meet conditions for aid, sources with
knowledge of the matter told Reuters. 
    Markets seemed to brush off a well-flagged report from
Britain showing its plans to bring down its deficit have fallen
behind target as the European debt crisis has hit global growth.
    It followed Italy's warning late on Wednesday that its
recession will be far more severe than forecast, making it
harder to reduce the country's debt burden. 
    Canadian government bond prices were mixed, with the
two-year bond edging up 1 Canadian cent to yield
1.137 percent, and the benchmark 10-year bond off 7
Canadian cents, yielding 1.865 percent.