CANADA FX DEBT-C$ firm after inflation data; jumps against yen
* Bank of Canada says took part in yen intervention
* C$ jumps against yen after BoC intervention
* C$ rises to $1.0167
* Bonds flat, weighs Libya against rising stocks
* Canada annual inflation rate eases in February (Adds details)
TORONTO, March 18 (Reuters) - The Canadian dollar CAD=D4 firmed against the U.S. currency on Friday, taking tame inflation data in stride, as the focus returned to Japan's nuclear crisis and a rise in oil prices on the prospect of possible military action against Libya.
Market watchers also digested actions by the Group of Seven rich nations to jointly intervene to weaken a soaring yen JPY=. For more see [ID:nLDE72H19Z].
In a move to calm financial markets grappling with continued anxiety over the crisis in quake-ravaged Japan, the Bank of Japan bought billions of dollars, backed up by action by European central banks. The Bank of Canada confirmed it took part, as did the U.S. Federal Reserve. [ID:nTZOIEE7TJ]
The amount of yen sold by the Bank of Canada in its intervention will be reflected in the country's foreign reserves report in early April, a central bank spokesman said on Friday.
The Department of Finance releases a monthly update on foreign currency reserves on the third business day of every month, making the next release due on April 5.
However, TD Securities analysts noted that Canada's yen reserves are relatively small at $252 million as of March 3 and that any movement in the yen versus the Canadian unit is more likely to be dictated by Fed action than by that of the Canadian central bank.
"Canada doesn't hold a ton of reserves in JPY, and can only do so much with CAD/JPY specifically," TD Securities said.
The Canadian dollar recently weakened against the yen, with one Canadian dollar buying at as little as 78.03 yen on Thursday, a level not seen since April, 2009.
It jumped as high as 83.21 yen immediately after the Bank of Canada confirmed it was intervening. CADJPY=
The currency held overnight gains as Canada's annual inflation rate in February cooled to 2.2 percent from 2.3 percent in January, just below the consensus forecast of 2.3 percent, and the core rate fell to its lowest level on record at 0.9 percent. [ID:nSCLIEE7AG]
The Canadian dollar "will probably get buffeted by geopolitical developments, particularly with things in the Middle East," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
Canada's currency, typically influenced by oil prices, pushed higher as U.S. oil prices CLc1 rose after the United Nations approved military action to contain Libyan leader Muammar Gaddafi, heightening tensions in the oil-rich Middle East. Libya said Friday it would call a cease-fire . [O/R]
At 9:25 a.m. (1325 GMT), the currency was at C$0.9836 to the U.S. dollar, or $1.0167, up from Thursday's North American session close at C$0.9863 to the U.S. dollar, or $1.0139.
Government bonds were flat to mildly lower as developments in Libya were offset by a rise in global stock markets. [MKTS/GLOB]
The two-year Canadian government bond CA2YT=RR was off 1 Canadian cent to yield 1.608 percent, while the 10-year bond CA10YT=RR was unchanged to yield 3.188 percent.
The tame inflation data implies less need for a swift interest rate hike, analysts said. Overnight index swaps, which trade based on expectations for the key central bank rate, showed traders scaled back bets for Bank of Canada rate hikes in the coming months. BOCWATCH (Reporting by Ka Yan Ng; Editing by Jeffrey Benkoe)
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