CANADA FX DEBT-C$ strengthens ahead of interest rate decision as oil firms

Wed Sep 7, 2016 9:21am EDT
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* Canadian dollar at C$1.2829, or 77.95 U.S. cents
    * Bond prices higher across the yield curve

    TORONTO, Sept 7 (Reuters) - The commodity-linked Canadian
dollar edged higher against its U.S. counterpart on Wednesday as
oil rose, with the loonie hovering near its highest in more than
two weeks ahead of a Bank of Canada interest rate decision later
in the morning.
    The Bank of Canada is widely expected to leave interest
rates unchanged at 0.5 percent as it waits to see how strongly
the economy can rebound after growth shrank in the second
quarter. Investors will look at the central bank's statement for
its assessment of the economy, particularly the export sector,
which is key to the bank's outlook. 
    Exports have been hampered this year by weak U.S. business
investment, while a weaker Canadian dollar has not helped
exports as much as expected. 
    Still, data on Friday showed exports jumped 3.4 percent in
July, hinting at an improvement in exports in the second half of
the year.
    Meanwhile, weaker U.S. data has weighed on the U.S. dollar
as it dimmed expectations for a near-term rate hike from the
Federal Reserve. 
    Recent weakening in the greenback helped push U.S. crude
 prices up 0.67 percent to $45.13 a barrel, but the
limited likelihood of a near-term agreement among the world's
biggest exporters to rein in production kept gains in check.
    At 9:07 a.m. EDT (1307 GMT), the Canadian dollar 
was trading at C$1.2829 to the greenback, or 77.95 U.S. cents,
stronger than Tuesday's close of C$1.2847, or 77.84 U.S. cents.
    The currency's weakest level was C$1.2862, while its
strongest was C$1.2828.
    On Tuesday, the Canadian dollar touched its strongest since
Aug. 19 at C$1.2827.  
    Canada's August employment report is due on Friday.
Investors will be looking to see whether the labor market can
recover some of the 31,200 jobs it unexpectedly lost the month
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year 
bond firmed 1.5 Canadian cents to yield 0.561 percent and the
benchmark 10-year rose 12 Canadian cents to yield
1.013 percent.

 (Reporting by Fergal Smith; Editing by Nick Zieminski)