CANADA FX DEBT-C$ strengthens to 4-mth high on Fed decision, firm data, oil rally

Wed Mar 16, 2016 4:37pm EDT
 
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(Updates prices)
    * Canadian dollar at C$1.3122, or 76.21 U.S. cents
    * Currency touched its strongest since Nov. 4 at C$1.3115
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, March 16 (Reuters) - The Canadian dollar
strengthened on Wednesday to a four-month high against its U.S.
counterpart after the Federal Reserve cut its rate hike
projections, while oil prices rose and domestic data showed
strength in manufacturing.
    The Federal Reserve held interest rates steady while
revising its outlook for interest rate increases to just two by
the end of the year. 
    "The market is really net negative on U.S. dollars and we
are actually seeing those flows back into commodity-based
currencies," said Jeff Scott, senior corporate dealer at OFX.
    Canada's strong manufacturing data also caught traders'
attention, Scott added.
    Manufacturing sales rose 2.3 percent in January, far more
than expected, while sales volumes reached their highest since
before the 2008-2009 recession, data from Statistics Canada
showed. 
    Expiring currency hedges may give exporters a competitive
edge. 
    Adding to support for the commodity-related currency, oil
prices rallied after major oil producers firmed up plans to meet
in Qatar to discuss an output freeze and as U.S. crude
stockpiles grew less than expected and gasoline demand soared.
 
    U.S. crude prices were up 5.83 percent to $38.46 a
barrel.
    The Canadian dollar ended at C$1.3122 to the
greenback, or 76.21 U.S. cents, much stronger than Tuesday's
close of C$1.3362, or 74.84 U.S.    
    Penetration of last week's strongest level for the currency
at C$1.3168 gave the currency's rally added momentum, said
Scott.
    It touched its strongest since Nov. 4 at C$1.3115, while its
weakest level was C$1.3406.
    Foreign investors resumed buying Canadian securities in
January with a big push into corporate and government debt,
while Canadians sold off their positions in foreign equities,
data from Statistics Canada showed. 
    Canadian government bond prices were higher across the
maturity curve in sympathy with U.S. Treasuries.
    The two-year price rose 5.5 Canadian cents to
yield 0.544 percent and the benchmark 10-year was up
23 Canadian cents to yield 1.304 percent.
    The Canada-U.S. two-year bond spread was 7.5 basis points
less negative at -31.9 basis points as Treasuries outperformed.

 (Reporting by Fergal Smith; Editing by Chizu Nomiyama and
Sandra Maler)