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