CANADA FX DEBT-C$ backs off 9-month high with Fed in no rush to hike

Wed Apr 27, 2016 4:32pm EDT
 
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* Canadian dollar at C$1.2619, or 79.25 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds Fed details, quote, updates prices)
    TORONTO/OTTAWA, April 27 (Reuters) - The Canadian dollar
touched a nine-month high against the greenback on Wednesday as
oil jumped, but signals from the U.S. central bank that it was
in no rush to raise interest rates ultimately left the currency
little changed.
    The loonie has rallied more than 16 percent from a 12-year
low in January of C$1.4689, helped by better-than-expected
domestic economic activity, fiscal stimulus and rebounding oil
prices.
    Oil prices on Wednesday reached their highest level of 2016,
with U.S. crude prices settling up $1.29 at $45.33 a
barrel.  
    The gains in oil helped the Canadian currency touch a
session high of C$1.2571 in the morning but it lost steam later
in the session as the Fed left the door open to an interest rate
hike in June, even as it implied it was in no hurry.
 
    "It lays a little bit of the groundwork for a rate hike but
again it's just kicking the can forward," said Rahim Madhavji,
president of KnightsbridgeFX.com.
    "The Fed showed (what) they're leaning toward and they're
moving in that direction, but they didn't really show their
cards."
    The Canadian dollar ended the North American
trading session at C$1.2619 to the greenback, or 79.25 U.S.
cents, a tad stronger than Tuesday's close of C$1.2621, or 79.23
U.S. cents. 
    As investors are trying to gauge when the next Fed hike will
come, the Bank of Canada is expected to stay on the sidelines
for some time after cutting rates twice last year.
    A shift in expectations for the direction of Canadian
interest rates has added to recent support for the loonie. The
market has swung from implying at the start of March a more than
50 percent chance of a rate cut this year to implying modest
risk of a hike, overnight index swaps (OIS) showed. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 4 Canadian
cents to yield 0.677 percent and the benchmark 10-year
 rising 43 Canadian cents to yield 1.505 percent.
    The 10-year yield on Tuesday reached its highest since Dec.
7 at 1.577 percent.

 (Reporting by Leah Schnurr and Fergal Smith; Editing by James
Dalgleish)