November 17, 2016 / 2:27 PM / 8 months ago

CANADA FX DEBT-C$ strengthens to a 1-week high as oil climbs

3 Min Read

* Canadian dollar at C$1.3423, or 74.50 U.S. cents
    * Loonie touches its strongest since Nov. 10 at C$1.3400
    * Bond prices lower across the yield curve

    TORONTO, Nov 17 (Reuters) - The Canadian dollar strengthened
to a one-week high against its U.S. counterpart on Thursday as
oil climbed, but gains for the loonie were restrained as a jump
in U.S. inflation left the door open to a Federal Reserve
interest rate hike next month.
    Oil prices rose as expectations of an OPEC deal to limit
production outweighed evidence of global oversupply and rising
inventories. U.S. crude futures were up 1.16 percent at
$46.10 a barrel. 
    Oil is one of Canada's major exports.
    U.S. consumer prices recorded their biggest increase in six
months in October, suggesting a pickup in inflation that
potentially clears the way for the Federal Reserve to raise
interest rates in December. 
    The Federal Reserve could raise U.S. interest rates
"relatively soon" if economic data keeps pointing to an
improving labor market and rising inflation, Fed Chair Janet
Yellen said. 
    At 9:01 a.m. EDT (1401 GMT), the Canadian dollar 
was trading at C$1.3423 to the greenback, or 74.50 U.S. cents,
stronger than Wednesday's close of C$1.3441, or 74.40 U.S.
cents.
    The currency's weakest level of the session was C$1.3450,
while it touched its strongest since Nov. 10 at C$1.3400.
    The gains helped the loonie pare losses from a sell-off
sparked by last week's U.S. election. On Monday, the currency
touched its weakest in eight months at C$1.3589.
    Lending activity to Canadian small businesses slowed
modestly in September, though borrowing picked up for
medium-sized firms, a report showed, suggesting overall economic
conditions were improving 
    Foreign investors bought a net C$11.77 billion in Canadian
securities in September, mainly in new bonds, Statistics Canada
said.    
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
 dipped 2 Canadian cents to yield 0.671 percent, and
the benchmark 10-year declined 20 Canadian cents to
yield 1.527 percent.       
    On Wednesday, the 10-year yield touched its highest intraday
level since December at 1.602 percent amid investor expectations
that U.S. President-elect Donald Trump will pursue policies that
will boost inflation.
    Canada's inflation report for October is due on Friday. The
annual inflation rate is forecast to rise to 1.5 percent,
bringing the rate closer to the Bank of Canada's 2 percent
target. 
    Canadian Prime Minister Justin Trudeau said on Wednesday
Canada would respond to concrete policy proposals that Trump
puts forward regarding renegotiating their trade rather than to
theoretical ones. 

 (Reporting by Fergal Smith Editing by W Simon)

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