CANADA FX DEBT-C$ weakens as stronger US$, lower oil prices offset CPI data
* Canadian dollar at C$1.2482 or 80.12 U.S. cents * Bond prices lower across the maturity curve By Solarina Ho TORONTO, Feb 26 (Reuters) - The Canadian dollar was softer against its U.S. counterpart on Thursday as weaker crude prices and stronger-than-expected data in the United States offset Canadian inflation figures that topped forecasts. The Canadian dollar had briefly pared earlier losses immediately after the inflation numbers were released, but quickly retreated to session lows as investors also digested a slew of U.S. data. The greenback strengthened against a basket of currencies as stronger-than-expected data for U.S. durable goods orders in January indicated resilience in business activity despite concerns that the surge in the U.S. dollar was hurting exports. The price of crude, a major Canadian export, fell on the latest jump in U.S. crude stockpiles, which hit a seasonal record high for the seventh week. The Canadian dollar, which was outperforming many of its currency counterparts, was trading at C$1.2482 to the greenback, or 80.12 U.S. cents at around 9:22 a.m. (1422 GMT), weaker than Wednesday's close of C$1.2423, or 80.50 U.S. cents. In Canada, the annualized rate of inflation dropped to 1 percent last month from 1.5 percent in December, but was still higher than the expected decline to 0.7 percent. The results supported the growing view that the Bank of Canada will not cut interest rates again next week as had been previously widely expected. "The numbers are moderately stronger than expected. I think on that basis it could provide a bit of a lift to the Canadian currency, but with U.S. inflation numbers ... out as well and oil price developments, that could well dominate," said Paul Ferley, assistant chief economist at Royal Bank of Canada. "It's consistent with some of their earlier comments that implied that they're going to hold steady on rates near-term, and just see how things play out in terms of the impact of the drop in oil prices on inflation and also on growth." Markets have struggled to interpret the Bank of Canada, and before Governor Stephen Poloz's comments they had priced in a 70 percent or more chance of another rate cut next week. That has since dropped to less than 30 percent. Canadian government bond prices were lower across the maturity curve, with the two-year down 5 Canadian cents to yield 0.496 percent and the benchmark 10-year down 21 Canadian cents to yield 1.348 percent. (Editing by Nick Zieminski)
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