CANADA FX DEBT-C$ firms after stronger-than-expected Q3 GDP

Fri Nov 29, 2013 9:34am EST
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* C$ at C$1.0568 vs US$, or 94.63 U.S. cents
    * GDP 2.7 percent in 3rd quarter, vs forecast of 2.5 percent
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Nov 29 (Reuters) - The Canadian dollar strengthened
to a session high against the greenback on Friday, backing
further away from recent four-month lows after data showed the
domestic economy had more strength than expected in the third
    The 2.7 percent annualized pace of growth - the fastest rate
in two years - was driven mainly by consumer spending and
business inventory accumulation, though there were also signs of
a rebound in business investment. 
    While the reading beat market forecasts, it also came on the
heels of a disappointing second quarter. Averaging the second
and third quarter gives a growth rate of a little over 2
percent, "a fair reflection of the underlying growth trend in
the economy," said Doug Porter, chief economist at BMO Capital
Markets in Toronto.
    "The 2.7 is a bit of an outlier and I suspect it will come
down to earth somewhat in the fourth quarter," he said.
    The Canadian dollar was at C$1.0568 to the
greenback, or 94.63 U.S. cents, stronger than Thursday's close
of C$1.0587 or 94.46 U.S. cents. 
    The Canadian currency has lost more than 2 percent since
late October, hurt by a retreat in the Bank of Canada's hawkish
tilt and expectations the U.S. Federal Reserve will soon move to
withdraw some monetary stimulus. The loonie hit C$1.0603 on
Wednesday, its lowest level since early July.
    The policy shift from the Bank of Canada has markets
expecting interest rates will stay at 1 percent into 2015.
    Friday's GDP report puts a "slightly healthier glow" on the
economy than the Bank of Canada suspected, making the central
bank likely to stay neutral at their meeting next week, said
    "I don't think there's a compelling case for them to ratchet
up the dovishness yet."
    The Bank of Canada will release its interest rate decision
on Wednesday.
    The two-year bond dipped 2 Canadian cents to
yield 1.100 percent, while the benchmark 10-year bond
 was off 15 Canadian cents to yield 2.556 percent.