CANADA FX DEBT-C$ firms after BoC comments, bond prices fall
* C$ firms to C$0.9775 to the U.S. dollar, or $1.0230
* Bond prices weaker across the curve
By Solarina Ho
TORONTO, March 28 (Reuters) - The Canadian dollar was stronger against its U.S. counterpart on Monday after comments over the weekend by the Bank of Canada underpinned expectations of a rate rise, even as oil prices retreated.
Canada's top central banker, Mark Carney, said soaring commodity prices, which have been a boon for Canada, could last for decades and warned emerging market peers that it would be a mistake to delay raising interest rates for too long. [ID:nN26115578]
"If you were listening to Carney, he was talking over the weekend about inflationary pressures and that the Canadian dollar strength is not the main issue for them," said John Curran, senior vice president at CanadianForex.
"If anything, that will help the Canadian dollar with people thinking there could be a rate hike in the near future."
The most recent Reuters poll shows that most of Canada's primary securities dealers are forecasting the next interest rate hike to be on either the bank's May 31 or July 19 announcements, while the market pricing reflects an October bet. [ID:nN18126761] [CA/POLL]
At 8:51 a.m. (1351 GMT), the currency CAD=D4 stood at C$0.9775 to the U.S. dollar, or $1.0230, up from Friday's North American finish of C$0.9817, or $1.0186.
The currency, which is often bolstered by higher oil prices, firmed despite weaker crude costs. Crude prices fell after Libyan rebels regained control of key oil towns and weekend unrest in the region was limited. [O/R]
"It's pretty lackluster to begin the week here," said Curran, adding that he expects the market to be looking to U.S. Federal Reserve speakers "for general market consensus since Plosser's comments on Friday."
Charles Plosser, president of the Philadelphia Federal Reserve, said on Friday that the U.S. central bank would have to raise rates and shrink its balance sheet "in the not-too-distant future" in order to avoid damaging the economy through inflation. The hawkish comments buoyed the U.S. dollar and pressured the Canadian currency on Friday. [ID:nDZE7DA02M]
"The Canadian dollar is not going to be a focus for many people at this point in time. Political risks are out there, but they're being way overplayed," said Curran.
The minority Canadian government fell on Friday, forcing an election in May, but market reaction was relatively muted. [ID:nN25289659]
With few drivers motivating the currency, the Canadian dollar was expected to be range-bound, trading between C$0.9750 and C$0.9850, until it finds something to provide momentum for the next move.
The monthly Canadian gross domestic product data is expected on Thursday, and the U.S. non-farm payrolls will be released on Friday, both of which will help investors gauge the economic recovery in North America.
Canadian bond prices were weaker across the curve, mirroring U.S. Treasuries, which widened earlier losses following U.S. data that showed a rise in personal income, spending and prices. [US/]
The two-year bond CA2YT=RR was down 10 Canadian cents to yield 1.792 percent, while the 10-year bond CA10YT=RR shed 53 Canadian cents to yield 3.313 percent. (Editing by Leslie Adler)
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