CANADA FX DEBT-C$ ends flat after thrust to 3-year high
* C$ closes exactly flat at C$0.9849 vs US$ $1.0153
* C$ has few technical barriers for further strength
* Bonds track US Treasuries higher (Updates to close)
By Claire Sibonney
TORONTO, Feb 17 (Reuters) - The Canadian dollar shot to its highest level against the greenback in nearly three years on Thursday, buoyed by optimism over U.S. economic growth, an oil-price rally and a positive outlook for global equities.
After pushing through key resistance at C$0.9832, the previous 2011 high, it jumped as far as C$0.9816 to the U.S. dollar, or $1.0187, in early trade, its loftiest level since March 2008.
After that, however, it retreated to within the tight range of C$0.9832-C$1.0060 that it has been confined to for most of the year as investors held their bets ahead of crucial inflation data on Friday.
Market players said they now see few technical barriers to the currency advancing out of that range again. [ID:nN17237763]
Jeremy Stretch, head of currency strategy at CIBC World Markets in London, said the Canadian dollar's break of its year-to-date best opened up the way towards C$0.9800 and highs last seen in 2008.
"As far as our CPI expectations are concerned, that probably will preclude a significant slide lower in dollar/CAD from here ... Unless we get a CPI surprise well beyond what we're anticipating, I think ($0.98) should remain untested, at least this side of the weekend," he said.
He noted there was reasonable buying interest in U.S. dollars in the C$0.9820-C$0.9840 area.
Analysts polled by Reuters are expecting the annual rate for headline inflation to ease in January, confirming that price pressures are not an immediate concern for the Bank of Canada. [ID:nN11296499]
"Tomorrow's CPI figures are going to be critical. So far the Bank of Canada has been vindicated in its cautious monetary policy stance, based on the trends in CPI." said Paresh Upadhyaya, head of Americas G10 FX strategy at Bank of America Merrill Lynch in New York.
"So tomorrow, if we were to see an upside surprise in headline and core CPI, the markets may start to get excited about a rate hike sooner than later."
A more hawkish Bank of Canada, he said, could pave the way for the Canadian dollar to test modern-day highs set in late 2007.
The central bank stressed in its January monetary report that the high-flying Canadian dollar was hampering recovery in the export sector, the backbone of the Canadian economy. [CA/INT]
The Canadian dollar CAD=D4 ended on Thursday at the exact same level as Wednesday's North American session close of C$0.9849 to the U.S. dollar, or $1.0153.
Canadian bond prices were higher across the curve, driven by a rise in U.S. Treasuries as mounting tensions in the Middle East boosted a safe-haven bid and U.S. jobless claims data pointed to benign wage pressures for the coming year. [US/]
The two-year Canadian government bond CA2YT=RR was up 7 Canadian cents to yield 1.908 percent, while the 10-year bond CA10YT=RR advanced 20 Canadian cents to yield 3.478 percent. (Reporting by Claire Sibonney; editing by Peter Galloway)
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