CANADA FX DEBT-C$ hits 7-mth high as soft growth hurts greenback

Fri Apr 27, 2012 2:06pm EDT
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* C$ at 7-month high of C$0.98 vs US$, or $1.0204
    * Soft U.S. GDP data weakens greenback
    * Bank of Canada outlook supports
    * Bond prices mostly lower

    By Jon Cook	
    TORONTO, April 27 (Reuters) - The Canadian dollar firmed to
a seven-month high against the U.S. currency on Friday as the
greenback weakened against a range of currencies following soft
U.S. economic growth data that raised prospect of more stimulus
from the Federal Reserve.	
    First-quarter U.S. economic growth cooled as businesses cut
back on investment and restocked shelves at a slower pace.
    The GDP data came on the heels of Thursday's disappointing
U.S. jobless claims report, raising expectations that the Fed
could launch another round of monetary easing, which would
likely be negative for the greenback.	
    "A generally weak U.S. dollar on the back of the GDP report
leaves the door open to further dovishness from the Fed," said
Camilla Sutton, chief currency strategist at Scotiabank.	
    "The Canadian dollar has rallied a fair bit over the last
few sessions," added Sutton.	
    At 1:44 p.m. (1744 GMT), the Canadian dollar was at
C$0.98 versus the U.S. currency, or $1.0204, up from Thursday's
finish at C$0.9840 versus the U.S. currency, or $1.0163. The
session high marked its strongest level since Sept. 19.	
    The currency was on track to notch its best weekly gain in
more than a month.	
    The Canadian dollar shrugged off an euro zone debt worries
after Spain's credit rating suffered another downgrade and data
on Friday revealed nearly 25 percent of the debt-ravaged
nation's workforce is unemployed. 	
    Earlier this week Fed Chairman Ben Bernanke said the U.S.
central bank "would not hesitate" to launch another round of
bond purchases to drive borrowing costs lower if it looked like
the economy needed it. 	
    That contrasted sharply with the Bank of Canada's more
positive Canadian economic outlook earlier this month that has
signaled the bank may start raising interest rates sooner than
    On Friday, Bank of Canada Governor Mark Carney maintained
the bank's "hawkish bias" when he addressed a business audience
in Ottawa, said Sutton. 	
    She added a stronger Canadian dollar could temper Carney's
desire to raise interest rates, for fear of boosting the
currency too high and hurting Canadian exports.	
    "If we see a big rally in the Canadian dollar the
expectations for interest rate (hikes) get priced out," she
    Sutton said now that the currency has broken out of the
range its traded in since January, C$0.98 is a key target, with
a close stronger than this "psychological" level likely to point
to further strength.	
    Canadian government bond prices were mostly lower. Canada's
two-year bond sagged 7 Canadian cents to yield 1.414
percent, while the benchmark 10-year bond dropped 23
Canadian cents to yield 2.078 percent.