CANADA FX DEBT-C$ closes higher after Bank of Canada less dovish than some expected

Wed Dec 2, 2015 4:57pm EST
 
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(New throughout, updates prices and market activity)
    * Canadian dollar at C$1.3349 or 74.91 U.S. cents
    * Bond prices lower across the maturity curve

    By Fergal Smith
    TORONTO, Dec 2 (Reuters) - The Canadian dollar rose against
the U.S. dollar on Wednesday after the Bank of Canada held
interest rates steady but used less dovish language in its
policy statement than some expected.
    Tuesday's news of a large fall in September gross domestic
product had left some in the market bracing for a more downbeat
outlook from the central bank, according to Doug Porter, chief
economist at BMO Capital Markets.
    "If the market is at all surprised it is maybe that the Bank
was not quite as dovish as some thought they might be today,"
Porter said.
    The bank kept its benchmark rate steady at 0.5 percent, as
expected, though it said vulnerabilities in the household sector
continued to edge higher. 
    Earlier, the currency had weakened as crude oil prices
retreated after a rise in U.S. inventories added to the global
glut and investors were not hopeful that OPEC would cut output
at this week's meeting. 
    U.S. private employers added 217,000 jobs in November,
signaling job growth is likely strong enough to support a
Federal Reserve interest rate hike this month. 
    Federal Reserve Chair Janet Yellen said she was "looking
forward" to a U.S. interest rate hike that will be seen as a
testament to the economy's recovery from recession. 
    The Canadian dollar settled at C$1.3349 to the
greenback, or 74.91 U.S. cents, firmer than the Bank of Canada's
official close on Tuesday of C$1.3364, or 74.83 U.S. cents.
    The currency's strongest level of the session was C$1.3309,
while its weakest level was C$1.3407, a nine day low.
    Against the euro, the Canadian dollar firmed to C$1.4164
after a soft inflation reading from the euro zone raised
expectations for aggressive policy easing from the European
Central Bank on Thursday. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year price down 4.5
Canadian cents to yield 0.619 percent and the benchmark 10-year
 falling 21 Canadian cents to yield 1.515 percent.
    The Canada-U.S. two-year bond spread was 0.8 of a basis
point wider at -32.0 basis points, while the 10-year spread was
little changed at -66.5 basis points.
    U.S. crude prices settled at $39.94 a barrel, down
4.56 percent, while Brent crude lost 3.76 percent to
$42.77. 

 (Reporting by Fergal Smith; Editing by Nick Zieminski, James
Dalgleish and David Gregorio)