CANADA FX DEBT-C$ strengthens on less dovish Bank of Canada

Wed Dec 3, 2014 5:09pm EST
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(Updates with final figures, new comments and additional
    * Canadian dollar closes at C$1.1366 or 87.98 U.S. cents
    * Bond prices mixed across the maturity curve

    By Solarina Ho
    TORONTO, Dec 3 (Reuters) - The Canadian dollar strengthened
against most major currencies on Wednesday after the Bank of
Canada said the country's economic recovery is broadening, but
it cautioned that plunging oil prices are a risk and that the
global economy is still struggling.
    The central bank, which held its policy rate unchanged at 1
percent as expected, noted that the impact of stronger Canadian
exports was beginning to show in increased business investment
and more jobs, but lower prices for oil and other commodities
could have a direct impact in lowering inflation.
    "We're seeing a little bit of tempered optimism in the
Canadian dollar today. The big driver of that has been a
less-dovish-than-expected Bank of Canada statement," said Scott
Smith, senior market analyst at Cambridge Mercantile Group in
    "Going into the report, the market was positioned a little
more on the dovish side."
    The Canadian dollar, which was outperforming nearly
all of its major counterparts on Wednesday, finished at $1.1366
to the greenback, or 87.98 U.S. cents, stronger than Tuesday's
close of C$1.1394, or 87.77 U.S. cents.
    Craig Alexander, chief economist at Toronto-Dominion Bank
said the less dovish tone was inevitable since the Bank of
Canada had to acknowledge the stronger growth in Canada and the
United States, and the higher inflation in Canada.
    However, he said the central bank's next interest rate
increase was likely still on hold.
    "I don't think the recent strength in Canadian economic
growth ... has changed their thinking because they are still
concerned about the weakness in the global economy, the
potential impact from lower oil prices," he said.
    Looking ahead, the Canadian dollar could be swept up by
moves in the U.S. currency on Thursday when the European Central
Bank (ECB) holds a policy meeting. On Friday, investor focus
will turn to employment data from Canada and the United States.
    Canadian government bond prices were mixed across the
maturity curve. The two-year bond gave back 4
Canadian cents to yield 1.028 percent, while the benchmark
10-year added 12 Canadian cents to yield 1.943

 (Reporting by Solarina Ho; Editing by Peter Galloway and Andre