CORRECTED-CANADA FX DEBT-C$ hits 3-week high on forecast-beating CPI data, higher oil

Mon Nov 24, 2014 9:12am EST
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(Correct closing value of C$ to C$1.1239 from C$12.39 in first
bullet point)
    * Canadian dollar closes at C$1.1239, or 88.98 U.S. cents
    * Bond prices mixed

    By Solarina Ho
    TORONTO, Nov 21 (Reuters) - The Canadian dollar rallied to a
three-week high against the greenback on Friday after Canadian
inflation data came in stronger than forecast, making an
interest-rate cut by the Bank of Canada highly unlikely.
    The currency was also buoyed by a rise in crude prices,
which had their first weekly gain in two months, that was
propelled by a rate cut in China and speculation that OPEC might
agree next week to reduce oil production. 
    In Canada, the consumer price index rose 2.4 percent
year-on-year in October, putting inflation at the highest level
since June and surpassing economists' forecasts for a more
modest increase of 2.1 percent. The CPI rise in September was
2.0 percent. 
    "With this unexpected pressure on the inflation side, it
raises the probability of the Bank of Canada moving into a
tightening mode and a higher probability is, I think, what is
providing a lift to the Canadian dollar," said RBC assistant
chief economist Paul Ferley, adding, however, that he did not
believe a rate hike was imminent.
    The Canadian dollar had its best showing since the
end of October. It touched a high of C$1.1191 to the greenback,
or 89.36 U.S. cents, during the session, more than a cent
stronger than Thursday's close of C$1.1306, or 88.45 U.S. cents,
before paring some of the gains.
    The loonie, which was outperforming nearly all major
currencies against the U.S. dollar, finished at C$1.1239, or
88.98 U.S. cents, and was about 0.4 percent stronger against the
U.S. dollar for the week.
    Next week, investor focus will turn to Canadian retail sales
data for September on Tuesday. It will be the final key piece of
economic data before third-quarter gross domestic product
figures are released on Friday. Market participants are
expecting a robust September after a very weak showing in July
and August.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year shedding 3.5
Canadian cents to yield 1.061 percent, and the benchmark 10-year
 gaining 9 Canadian cents to yield 2.008 percent.

 (Additional reporting by Euan Rocha; Editing by Peter Galloway)