CANADA FX DEBT-C$ hits five-week high after inflation data

Thu Mar 19, 2009 8:11am EDT
 
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TORONTO, March 19 (Reuters) - The Canadian dollar firmed to a five-week high against the U.S. currency on Thursday following data that showed Canada's annual inflation rate surged unexpectedly in February.

At 8:05 a.m. (1205 GMT), the Canadian dollar was at C$1.2260 to the U.S. dollar, or 81.57 U.S. cents, up from Wednesday's close at C$1.2463 to the U.S. dollar, or 80.24 U.S. cents.

Ahead of the data, the unit was at C$1.2396 to the U.S. cents, or 80.67 U.S. cents. But in the wake of the report, the currency strengthened to C$1.2240, or 81.70 U.S. cents, its highest level since Feb. 10.

"I think the bigger driver in terms of the Canadian dollar is what happens to the U.S. dollar," said Paul Ferley, assistant chief economist Royal Bank of Canada.

"The actions by the (U.S. Federal Reserve) yesterday with an aggressive easing move put a fair bit of downward pressure on the U.S. dollar to the benefit of Canada. I think that's probably the more dominant trend right now."

Statistics Canada said annual inflation jumped to 1.4 percent from 1.1 percent in January despite declines in gasoline and vehicles prices compared with a year earlier. [ID:nN19500487]

On Thursday morning, domestic government bond prices were lower at the short end of the curve but slightly higher at the long end. (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)