CANADA FX DEBT-C$ slightly weaker as Fed weighs, oil supports
(Adds strategist comment, updates prices) * Canadian dollar ends at C$$1.4103, or 70.91 U.S. cents * Currency made a three-week high earlier in the session * Bond prices higher across the maturity curve By Alastair Sharp TORONTO, Jan 27 (Reuters) - The Canadian dollar slipped in volatile trade against a broadly weaker U.S. counterpart on Wednesday, pulling back from a three-week high reached earlier in the session as the U.S. Federal Reserve acknowledged global worries and crude oil prices rose. The greenback weakened against a basket of major currencies after the U.S. Federal Reserve said it was "closely monitoring" global economic and financial developments, suggesting it may slow the pace of planned interest rate hikes. The Canadian dollar ended the session trading at C$1.4103 to the greenback, or 70.91 U.S. cents, slightly weaker than Tuesday's official close of C$1.4075, or 71.05 U.S. cents. The currency reached its strongest level since Jan. 6 at C$1.4028, while its weakest was C$1.4156. "The loonie was a little bit erratic today," said Rahim Madhavji, president of KnightsbridgeFX.com. "We're continuing to see the Canadian dollar pretty much tied on a string with oil prices," he added. Oil futures jumped after Russia indicated it could co-operate with OPEC, fanning hopes for a deal to reduce a global oversupply that sent prices to the lowest levels in over a dozen years last week. Crude prices had earlier fallen on a surprise rise in U.S. inventories. Madhavji said he expects the loonie to trade between C$1.40 and C$1.43 against the greenback in the next month after a sharp weakening took it almost to C$1.47 earlier this month. "The key thing for the Canadian dollar is still the Bank of Canada, oil prices, and the economy," he said. "All eyes are on the next data point - GDP - if it's surprising to the downside I think it opens up a whole new can of worms." Friday's domestic gross domestic product data for November is expected to show a rebound in growth after October's contraction. During the session the Canadian dollar touched its strongest level since the Bank of Canada surprised many traders and left its policy rate on hold at 0.50 percent last week. The implied probability of a rate cut in March has dwindled to 15 percent from 80 percent before the interest rate decision. Canadian government bond prices were higher across the maturity curve, with the two-year up 2 Canadian cents to yield 0.421 percent and the benchmark 10-year adding 18 Canadian cents to yield 1.245 percent. (Additional reporting by Fergal Smith; Editing by Lisa Von Ahn and Sandra Maler)
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