CANADA FX DEBT-C$ strengthens as Fed stance pressures greenback

Thu Feb 2, 2017 9:28am EST
 
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* Canadian dollar at C$1.2998, or 76.93 U.S. cents
    * Bond prices higher across a flatter yield curve
    * 10-year yield touches its lowest in more than one week

    TORONTO, Feb 2 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Thursday as oil rose and the
greenback lost further ground since the Federal Reserve interest
rate decision a day ago.
    The U.S. dollar fell to its lowest since mid-November
after the Fed disappointed investors hoping for a clear sign of
a March interest rate rise, while signs that the new U.S.
administration favors a weaker greenback also weighed on the
currency. 
    U.S. crude prices were up 0.48 percent at $54.14 a
barrel as evidence that OPEC and other big exporters were
cutting production more than offset a sharp rise in U.S. crude
and gasoline stockpiles.
    Oil is one of Canada's major exports.        
    At 9:05 a.m. ET (1405 GMT), the Canadian dollar was
trading at C$1.2998 to the greenback, or 76.93 U.S. cents,
stronger than Wednesday's close of C$1.3047, or 76.65 U.S.
cents.
    The currency traded in a range of C$1.2981 to C$1.3050.
    Gains for the loonie came after domestic data this week
showed that the economy expanded faster than expected in
November, and that the manufacturing sector grew at its fastest
pace in over two years in January.
    In addition, Canadian car and light truck sales rose 2.2
percent in January over last year to an all-time record for the
month, DesRosiers Automotive Consultants said on
Wednesday. 
    On Tuesday, Bank of Canada Governor Stephen Poloz made clear
that the central bank sees no need to follow the Fed with
interest rate hikes, and he reiterated that the firmer Canadian
dollar was a headwind for the export sector. 
    The loonie rose 3.2 percent in January after climbing 3.1
percent in 2016. On Tuesday, it touched its strongest level
since Sept. 9 at C$1.2969.    
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
 rose 1.5 Canadian cents to yield 0.767 percent, and
the 10-year climbed 34 Canadian cents to yield 1.720
percent.
    The 10-year yield touched its lowest intraday since Jan. 24
at 1.712 percent.

 (Reporting by Fergal Smith Editing by W Simon)