CANADA FX DEBT-C$ firms on inflation data, but slips 0.3 pct on the week
* Canadian dollar at C$1.1013 or 90.80 U.S. cents * Bond prices lower across the maturity curve (Adds analyst's comment, updates prices to close) By Alastair Sharp 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. The currency slipped 0.3 percent on the week, however, despite a recent spate of solid economic data that has prompted some analysts to predict that some strengthening might be on the horizon for the Canadian dollar. "Canadian inflation numbers are clearly turning higher, and the Bank of Canada will have no choice but to remove its easing bias as the strength continues," said Adam Button, currency analyst at ForexLive in Montreal. The central bank's policy stance is officially neutral, a position it confirmed on Wednesday, but its retreat from a hawkish tilt late last year has led some to factor in the possibility of a rate cut. Button said the currency could strengthen to the low C$1.09s in the next week or so, although such a move would be dependent on a rise in commodity prices. Canada is a major exporter of natural resources. U.S. oil prices rose on Thursday on positive jobs data south of the border, while base metals prices also moved higher. The loonie stuck to a tight range on Thursday and trading was muted heading into the long weekend. Financial markets in Canada are closed on Friday for the Good Friday holiday. Domestic annual inflation rate rose to 1.5 percent in March, beating expectations for a 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 ended the session at C$1.1013 to the greenback, or 90.80 U.S. cents, just stronger than Wednesday's close of C$1.1018, or 90.76 U.S. cents. It was at C$1.0979, or 91.08 U.S. cents, last Friday. The inflation report came a day after the Bank of Canada flagged its concerns about a weak inflation environment, even as it forecast inflation will pick up this year. The bank kept its benchmark interest unchanged at 1.0 percent on Wednesday 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 lower across the maturity curve, with the two-year down 4 Canadian cent to yield 1.075 percent and the benchmark 10-year was also off 49 cents to yield 2.445 percent. (Additional reporting by Solarina Ho and Leah Schnurr; Editing by Peter Galloway)
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