CANADA FX DEBT-C$ ends slightly lower after hitting 12-week high

Mon Feb 29, 2016 4:39pm EST
 
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(Adds strategist comment, updates prices to close)
    * Canadian dollar settles at C$1.3531, or 73.90 U.S. cents
    * Bond prices mixed across the maturity curve

    By Alastair Sharp
    TORONTO, Feb 29 (Reuters) - The Canadian dollar touched a
fresh 12-week high against its U.S. counterpart before ending
slightly weaker on Monday, as crude oil prices rose and giant
commodity consumer China eased monetary policy in an attempt to
spur growth.
    The risk-sensitive commodity currency appreciated more than
3 percent against the greenback in February despite oil ending
the month near where it started it, helped by bets the U.S.
Federal Reserve will not rush to raise interest rates and that
stimulus from Ottawa will boost domestic growth.
    But the trend is unlikely to continue, said Mark Chandler,
head of Canadian fixed income and currency strategy at Royal
Bank of Canada.
    Chandler said planned federal government spending might only
add half a percentage point to gross domestic product, while
decent data could help the Fed look past recent market turmoil.
    "It's possible, if we get a strong payroll report (due on
Friday) particularly in the U.S. that the Canadian dollar may
trade a little weaker from here," he said.
    The Canadian dollar settled at C$1.3531 to the
greenback, or 73.90 U.S. cents, just weaker than Friday's
official close of C$1.3514, or 74 cents.
    Its strongest level of the session was C$1.3506, a level
last seen on Dec. 7, while its weakest was C$1.3524.
    Chandler said it should trade closer to C$1.40.
    A weekend meeting of G20 finance chiefs ended with no new
plan to spur global growth.    
    However, oil prices jumped 3 percent after China moved to
boost its slowing economy and OPEC kingpin Saudi Arabia said it
would work with other producers to limit oil market volatility.
  
    Canada's current account deficit widened modestly in the
fourth quarter to C$15.38 billion ($11.34 billion) from a
revised C$15.31 billion in the third quarter. 
    Canadian producer prices rose 0.5 percent in January, the
first gain in six months, as higher costs for vehicles offset
lower energy prices. 
    Speculators reduced their bearish bets against the Canadian
dollar after they reached five-month highs in January.
 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price down half a
Canadian cent to yield 0.521 percent and the benchmark 10-year
 off 7 Canadian cents to yield 1.190 percent. Prices
for 3-7 year maturities rose.
    Canadian gross domestic product data for the fourth quarter
is awaited on Tuesday. 

 (Additional reporting by Fergal Smith; Editing by Bernadette
Baum and Andrew Hay)