CANADA FX DEBT-C$ hits nearly 3-month high as greenback slides

Tue Jan 17, 2017 4:56pm EST
 
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(Adds broker comment, updates prices to close)
    * Canadian dollar settles at C$1.3058, or 76.58 U.S. cents
    * Loonie touches its strongest since Oct. 19 at C$1.3019
    * Bond prices higher across yield curve

    By Alastair Sharp
    TORONTO, Jan 17 (Reuters) - The Canadian dollar strengthened
to a nearly three-month high against its U.S. counterpart on
Tuesday, one day before a Bank of Canada interest rate decision
and updated outlook, as a New Year selloff of the greenback
deepened.
    The U.S. dollar fell along with stocks and bond
yields after U.S. President-elect Donald Trump said the strong
greenback was hurting the nation's competitiveness. 
    "This is just noise in the context of an upswing," said
Rahim Madhavji, president of KnightsbridgeFX.com in reference to
currency moves related to Trump's comments. 
    "We still think the U.S. dollar will bounce back" over the
next three months as the U.S. economy improves and investors bet
on more rate hikes from the Federal Reserve, he said. "I don't
think the Canadian economy will move in the same way or with the
some speed."
    Analysts expect the Bank of Canada to announce on Wednesday
that it would leave its policy rate on hold at 0.5 percent,
while nearly half of economists polled recently pared back their
Canadian growth forecasts, with the possibility that Trump will
follow through on protectionist rhetoric clouding the outlook.  
   
    Recent domestic data has shown a surge in jobs in December
and the first trade surplus in more than two years in November,
while a Bank of Canada survey last week pointed to improving
business conditions.
    U.S. crude prices settled marginally higher, as the
weaker greenback offset forecasts that U.S. and Russian
producers would boost output later this year. 
    The Canadian dollar settled at C$1.3058 to the
greenback, or 76.58 U.S. cents, much stronger than Monday's
close of C$1.3187, or 75.83 U.S. cents.
    The currency's weakest level of the session was C$1.3190,
while it touched its strongest since Oct. 19 at C$1.3019.
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year 
rose 3.5 Canadian cents to yield 0.775 percent, and the 10-year
 climbed 25 Canadian cents to yield 1.666 percent.
    Lending to small businesses in Canada picked up in November
on gains in the manufacturing and retail sectors, a report
showed, suggesting companies felt more confident with the U.S.
election out of the way. 
    The PayNet Canadian Small Business Lending Index rose to
119.9 from 116.5 in October, while lending to medium-sized
companies increased to 218.3 from 211.3.

 (Additional reporting by Fergal Smith; Editing by Lisa Von Ahn
and James Dalgleish)