CANADA FX DEBT-C$ ends stronger; best week since early March

Fri Apr 20, 2012 4:44pm EDT
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* C$ at C$0.9926 vs US$, or $1.0075
    * German data lifts market
    * IMF moves to boost euro zone funding
    * Market shrugs off soft Canadian inflation data
    * Bonds prices mostly lower

    By Jon Cook	
    TORONTO, April 20 (Reuters) - The Canadian dollar ended its
best week against its U.S. counterpart since early March on
Friday as debt concerns eased in Europe ahead of key French
elections and the Bank of Canada's rosier outlook raised growth
expectations domestically.	
    Concerns about the euro zone's financial stability had
pressured the Canadian currency, chipping away at sharp gains 
earlier in the week after the Bank of Canada surprised the
market with a more bullish economic forecast and signaled it was
starting to think more seriously about tightening monetary
    But as the week came to a close, fears about Spain's ability
to finance its considerable debt waned in the face of an
unexpectedly upbeat reading of German business morale. The
broader rise in risk appetite helped support the Canadian
    The Canadian dollar ended Friday's North American
session at C$0.9926 against the greenback, or $1.0075, up
slightly from Thursday's finish at C$0.9952 against the U.S.
dollar, or $1.0048.	
    It was up about 0.7 percent for the week, its best weekly
jump since the beginning of March. R euters data and figures from
the Commodity Futures Trading Commission showed speculators
increased their bets on a stronger Canadian dollar this week.
    "It's the Bank of Canada influence. It's the hawkish tone,"
said Jack Spitz, a managing director of foreign exchange trading
at National Bank Financial.	
    Spitz noted that the Canadian dollar fell against most
Europe-based currencies and generally traded "sideways" during
the session, but "if the metrics are to measure Canada versus
the U.S. dollar, then the overall view is stable to stronger."	
    The euro also got a boost after the Group of 20 nations on
Friday pledged more than $430 billion to better than double the
International Monetary Fund's lending capacity and protect the
global economy from the euro zone's debt crisis. 
    Most analysts, however, expect the euro to remain range
bound ahead of Sunday's first round of the French vote.
Financial markets were nervous the policies espoused by the
expected eventual winner, Socialist Francois Hollande, could be
detrimental to the economy.	
    Canadian inflation data on Friday also gave investors some
pause, but its negative influence was short-lived. Canada's
annual inflation rate dipped to 1.9 percent in March from 2.6
percent in February, slightly below the 2.0 percent forecast by
market operators. 	
    Low inflation removes pressure from the Bank of Canada to
resume raising rates. But analysts noted the central bank's
hawkish tone this week was based largely on the longer-term
    "The Bank of Canada's warning about a rate hike is more
about its expectations that the economy will grow fast enough to
create a potential inflation risk in 2013 rather than any
immediate inflation pressures," said Avery Shenfeld, chief
economist at CIBC World Markets. 	
    Several of the country's primary dealers this week pulled
forward their forecasts for an interest rate hike, according to
a Reuters poll, with the central bank now expected to tighten
policy early next year. 	
    Canadian government bond prices were mostly lower. The
two-year bond shed 3 Canadian cents to yield 1.352
percent. The benchmark 10-year bond was down 20
Canadian cents to yield 2.070 percent.