CANADA FX DEBT-C$ firms after inflation rises more than expected
* Canadian dollar at C$1.0998 or 90.93 U.S. cents * Bond prices mostly lower across the maturity curve By Leah Schnurr TORONTO, April 17 (Reuters) - The Canadian dollar firmed against the greenback on Thursday after data showed domestic annual inflation was stronger than expected in March, boosted by higher energy costs. Still, the loonie stuck to a tight range and trading looked as if it could be muted heading into the long weekend. Financial markets in Canada are closed on Friday for the Good Friday holiday. The annual inflation rate rose to 1.5 percent in March, beating expectations for 1.4 percent rise, while the less volatile core measure edged up to 1.3 percent, as expected. "A little bit stronger than expected could put a little bit more upward pressure on interest rates and maybe provide a little bit of support for the Canadian dollar," said Paul Ferley, assistant chief economist at Royal Bank Of Canada in Toronto. The Canadian dollar was at C$1.0998 to the greenback, 90.93 U.S. cents, stronger than Wednesday's close of C$1.1018, or 90.76 U.S. cents. The loonie hit a session high shortly after the data was released. The inflation report came a day after the Bank of Canada flagged its concerns about the weak inflation environment, even as it forecast inflation will pick up this year. The bank kept its benchmark interest unchanged at 1.0 percent as it has done since September 2010. "It is a bit of a precarious situation for the bank to be in because they do want to stay sidelined for an extended period of time," said Mazen Issa, senior Canada macro strategist at TD Securities in Toronto. "The acceleration in inflation is occurring, we definitely do think that inflation troughed in the last quarter of last year, so they're going to have to tread a little bit carefully now in terms of their communication." Canadian government bond prices were mostly lower across the maturity curve, with the two-year down 1 Canadian cent to yield 1.056 percent and the benchmark 10-year was also down 1 Canadian cent to yield 2.391 percent. (Additional reporting by Solarina Ho; editing by Peter Galloway)
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