CANADA FX DEBT-C$ strengthens to fresh 9-month high as oil rallies
* Canadian dollar at C$1.2650, or 79.05 U.S. cents * Loonie touches its strongest since July 6 at C$1.2593 * Bond prices lower across the maturity curve By Fergal Smith TORONTO, April 20 (Reuters) - The Canadian dollar strengthened to a nine-month high against its U.S. counterpart on Wednesday, shrugging off weaker than expected domestic data as oil prices turned higher. The currency has rallied 16 percent since hitting a 12-year low in January, helped by the recent rebound in oil prices. "The slightest hint of good news for oil and it is off to the races and the Canadian dollar is along for the ride," said Adam Button, currency analyst at ForexLive. U.S. crude prices settled at $42.63 a barrel, up 3.77 percent after a smaller-than-expected build in U.S. crude inventories and as oil bulls bet that major crude producers would meet again to try to curtail output. Unraveling of expectations for the Bank of Canada to cut interest rates has added to support for the loonie. "If anything the next move from the Bank of Canada is most likely to be a hike, that's a major change from two months ago," said Button. Data from overnight index swaps implies almost no change in interest rates by the Bank of Canada this year. At the start of March, the market had implied a more than 50 percent probability of a rate cut. The Canadian dollar closed at C$1.2650 to the greenback, or 79.05 U.S. cents, slightly stronger than Tuesday's close of C$1.2660, or 78.99 U.S. cents. The currency's weakest level of the session was C$1.2731, while it touched its strongest since July 6 at C$1.2593. "The Canadian dollar is in the sweet spot for the economy, for exporters," said Button. Canadian wholesale trade dropped by more than expected in February, falling 2.2 percent from January on declines in most industries. However, it followed three consecutive monthly increases. Canadian government bond prices were lower across the maturity curve, with the two-year price down 2 Canadian cents to yield 0.626 percent and the benchmark 10-year falling 8 Canadian cents to yield 1.335 percent. The Canada-U.S. 10-year spread was 5.3 basis points more negative at -51.0 basis points as U.S. Treasuries underperformed. On Tuesday, it touched its smallest gap since May last year at -45.7 basis points. (Reporting by Fergal Smith; editing by Nick Zieminski and David Gregorio)
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