CANADA FX DEBT-C$ strengthens to 4-mth high on Fed decision, firm data, oil rally
(Updates prices) * Canadian dollar at C$1.3122, or 76.21 U.S. cents * Currency touched its strongest since Nov. 4 at C$1.3115 * Bond prices higher across the maturity curve By Fergal Smith TORONTO, March 16 (Reuters) - The Canadian dollar strengthened on Wednesday to a four-month high against its U.S. counterpart after the Federal Reserve cut its rate hike projections, while oil prices rose and domestic data showed strength in manufacturing. The Federal Reserve held interest rates steady while revising its outlook for interest rate increases to just two by the end of the year. "The market is really net negative on U.S. dollars and we are actually seeing those flows back into commodity-based currencies," said Jeff Scott, senior corporate dealer at OFX. Canada's strong manufacturing data also caught traders' attention, Scott added. Manufacturing sales rose 2.3 percent in January, far more than expected, while sales volumes reached their highest since before the 2008-2009 recession, data from Statistics Canada showed. Expiring currency hedges may give exporters a competitive edge. Adding to support for the commodity-related currency, oil prices rallied after major oil producers firmed up plans to meet in Qatar to discuss an output freeze and as U.S. crude stockpiles grew less than expected and gasoline demand soared. U.S. crude prices were up 5.83 percent to $38.46 a barrel. The Canadian dollar ended at C$1.3122 to the greenback, or 76.21 U.S. cents, much stronger than Tuesday's close of C$1.3362, or 74.84 U.S. Penetration of last week's strongest level for the currency at C$1.3168 gave the currency's rally added momentum, said Scott. It touched its strongest since Nov. 4 at C$1.3115, while its weakest level was C$1.3406. Foreign investors resumed buying Canadian securities in January with a big push into corporate and government debt, while Canadians sold off their positions in foreign equities, data from Statistics Canada showed. Canadian government bond prices were higher across the maturity curve in sympathy with U.S. Treasuries. The two-year price rose 5.5 Canadian cents to yield 0.544 percent and the benchmark 10-year was up 23 Canadian cents to yield 1.304 percent. The Canada-U.S. two-year bond spread was 7.5 basis points less negative at -31.9 basis points as Treasuries outperformed. (Reporting by Fergal Smith; Editing by Chizu Nomiyama and Sandra Maler)
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