CANADA FX DEBT-C$ weakens as stronger US$, lower oil prices offset CPI data

Thu Feb 26, 2015 9:51am EST
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* Canadian dollar at C$1.2482 or 80.12 U.S. cents
    * Bond prices lower across the maturity curve

    By Solarina Ho
    TORONTO, Feb 26 (Reuters) - The Canadian dollar was softer
against its U.S. counterpart on Thursday as weaker crude prices
and stronger-than-expected data in the United States offset
Canadian inflation figures that topped forecasts.
    The Canadian dollar had briefly pared earlier losses
immediately after the inflation numbers were released, but
quickly retreated to session lows as investors also digested a
slew of U.S. data.
    The greenback strengthened against a basket of currencies as
stronger-than-expected data for U.S. durable goods orders in
January indicated resilience in business activity despite
concerns that the surge in the U.S. dollar was hurting exports. 
    The price of crude, a major Canadian export, fell on the
latest jump in U.S. crude stockpiles, which hit a seasonal
record high for the seventh week. 
    The Canadian dollar, which was outperforming many
of its currency counterparts, was trading at C$1.2482 to the
greenback, or 80.12 U.S. cents at around 9:22 a.m. (1422 GMT),
weaker than Wednesday's close of C$1.2423, or 80.50 U.S. cents.
    In Canada, the annualized rate of inflation dropped to 1
percent last month from 1.5 percent in December, but was still
higher than the expected decline to 0.7 percent. The results
supported the growing view that the Bank of Canada will not cut
interest rates again next week as had been previously widely
    "The numbers are moderately stronger than expected. I think
on that basis it could provide a bit of a lift to the Canadian
currency, but with U.S. inflation numbers ... out as well and
oil price developments, that could well dominate," said Paul
Ferley, assistant chief economist at Royal Bank of Canada.
    "It's consistent with some of their earlier comments that
implied that they're going to hold steady on rates near-term,
and just see how things play out in terms of the impact of the
drop in oil prices on inflation and also on growth."
    Markets have struggled to interpret the Bank of Canada, and
before Governor Stephen Poloz's comments they had priced in a 70
percent or more chance of another rate cut next week. That has
since dropped to less than 30 percent. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 5 Canadian
cents to yield 0.496 percent and the benchmark 10-year
 down 21 Canadian cents to yield 1.348 percent.

 (Editing by Nick Zieminski)