CANADA FX DEBT-C$ gains; growth pressures central bank to ease cautious stance
* Canadian dollar at C$1.3298, or 75.20 U.S. cents * Bond prices lower across much of the yield curve By Fergal Smith TORONTO, March 31 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday after data showing robust domestic growth in January increased pressure on the Bank of Canada to abandon its cautious stance on a possible interest-rate hike. Canada's economy expanded by a greater-than-expected 0.6 percent in January from December, indicating first-quarter growth will be stronger than expected. Analysts in a Reuters survey had forecast 0.3 percent growth. On Tuesday, Bank of Canada Governor Stephen Poloz defended the central bank's cautious outlook on monetary policy tightening - which contrasts with the U.S. Federal Reserve's hike earlier this month and plan for more - in the face of recent stronger-than-expected domestic data. "It really makes it hard to imagine the Bank of Canada sounding overly dovish in April," said Andrew Kelvin, senior rates strategist at TD Securities. The chance of a Bank of Canada interest rate hike this year rose to nearly 30 percent from less than 25 percent before the GDP report, data from the overnight index swaps market showed. At 9:36 a.m. ET (1336 GMT), the Canadian dollar was trading at C$1.3298 to the greenback, or 75.20 U.S. cents, stronger than Thursday's close of C$1.3334, or 75.00 U.S. cents. The currency traded in a range of C$1.3290 to C$1.3368. Gains for the loonie came even as the price of oil, one of Canada's major exports, retreated after a three-day rally ran out of steam. U.S. crude prices fell 0.32 percent to $50.19 a barrel. Canadian government bond prices were lower across much of the yield curve, with the two-year down 4 Canadian cents to yield 0.773 percent and the 10-year falling 6 Canadian cents to yield 1.645 percent. The difference between Canadian and U.S. 2-year yields narrowed by 3.8 basis points to a spread of -49.7 basis points, as Canadian bonds underperformed. (Reporting by Fergal Smith; Editing by Bernadette Baum)
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