CANADA FX DEBT-C$ strengthens on less dovish Bank of Canada
(Updates with final figures, new comments and additional details) * 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 Calgary. "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 percent. (Reporting by Solarina Ho; Editing by Peter Galloway and Andre Grenon)
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