CANADA FX DEBT-C$ rises after inflation data; oil climbs

Wed May 20, 2009 8:14am EDT
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 TORONTO, May 20 (Reuters) - Canada's currency shot higher
on Wednesday, boosted by higher oil prices and domestic
inflation data that was seen making it less likely that the
Bank of Canada will embark on quantitative easing.
 Canada's annual inflation rate in April dropped to a
14-year low of 0.4 percent from 1.2 percent in March on lower
energy prices, Statistics Canada said on Wednesday.
 However, the core inflation rate fell to 1.8 percent from
2.0 percent in March and was in line with expectations.[ID:nOTT001607]
 "The inflation backdrop the Bank of Canada sees, confirmed
by this data, is that it does not see a significant deflation
risk developing in the Canadian economy so the threat of
quantitative easing, is easing," said David Watt, senior
currency strategist RBC Capital Markets.
 Watt added a firmer price of oil, above $60 a barrel, also
supported the currency's rise.
 Prior to data, traders in London said there were rumors of
the numbers had been leaked and would be weaker than
 The Canadian dollar CAD=D3 rose as much as C$1.1476, or
87.14 U.S. cents, from around C$1.1553, or 86.56 U.S. cents,
before the data. The currency finished at C$1.1563 to the U.S.
dollar, or 86.48 U.S. cents, on Tuesday.
 At 7:53 a.m. (1153 GMT), the Canadian currency was at
C$1.1485 to the U.S. dollar, or 87.08 U.S. cents.
 Canadian bond prices were largely lower across the curve,
following the bigger U.S. Treasury market as prices dipped on
rising equities. [ID:nLK111147]
 (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)