CANADA FX DEBT-C$ strengthens to nine-day high as oil, stocks rally
(Adds analyst comments and details on Bank of Canada rate cut expectations, updates prices) * Canadian dollar ends at C$1.2898, or 77.43 U.S. cents * Loonie touches its strongest since July 5 at C$1.2863 * Bond prices lower across the maturity curve By Fergal Smith TORONTO, July 14 (Reuters) - The Canadian dollar strengthened to a nine-day high against its U.S. counterpart on Thursday as higher oil and stock prices supported the risk-sensitive commodity-linked currency. Gains for the loonie come one day after the Bank of Canada left its policy rate unchanged at 0.50 percent and stayed optimistic about the economic outlook even as it cut its growth forecasts. "In times of uncertainty and fragility for markets it is not unsurprising to see central banks stand pat and try to bolster confidence," said Michael Goshko, corporate risk manager at Western Union Business Solutions. The implied probability of a Bank of Canada interest rate cut this year dipped to 16 percent, overnight index swaps data showed. It had been above 30 percent in the week following the British referendum vote on June 23 to leave the European Union. The Bank of England also stood pat on rates on Thursday, surprising many traders who had expected a cut after the surprise Brexit 'leave' vote. Still, two major U.S. stock indexes set fresh intraday record highs after JPMorgan reported second-quarter profits that beat estimates and as the BoE said it was likely to deliver stimulus in August. Expectations of more central bank stimulus have contributed to stocks' gains in the past week. Oil prices climbed as traders covered short positions a day after crude futures were hammered. U.S. crude oil futures settled up 93 cent at $45.68 a barrel. The Canadian dollar ended at C$1.2898 to the greenback, or 77.43 U.S. cents, stronger than Wednesday's close of C$1.2986, or 77.01 U.S. cents. The currency's weakest level of the session was C$1.2987, while it touched its strongest since July 5 at C$1.2863. Given recent weak Canadian trade data it was surprising that Bank of Canada Governor Stephen Poloz did not take the opportunity at Wednesday's press conference to discuss the currency, Goshko added. Canadian government bond prices were lower across the maturity curve in sympathy with U.S. Treasuries as improved risk appetite reduced the appeal of safe-haven assets. The two-year price fell 9.5 Canadian cents to yield 0.542 percent and the benchmark 10-year dropped 47 Canadian cents to yield 1.053 percent. On Monday, the 10-year yield hit a five-month low at 0.935 percent. New home prices in Canada rose by a higher-than-forecast 0.7 percent in May from April, mainly on higher prices in Vancouver and the Toronto region. (Reporting by Fergal Smith; Editing by Nick Zieminski and James Dalgleish)
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