CANADA FX DEBT-C$ firms to near 9-month high as oil rallies
(Adds dealer quotes, details on growth forecasts; updates prices) * Canadian dollar at C$1.2765, or 78.34 U.S. cents * Bond prices lower across steeper maturity curve By Fergal Smith TORONTO, April 12 (Reuters) - The Canadian dollar strengthened to a near nine-month high against its U.S. counterpart on Tuesday, as rising oil prices improved the economic outlook a day before the Bank of Canada's interest rate announcement. The currency has rebounded 15 percent since January when it hit a 12-year low at C$1.4689, supported by a partial recovery in oil prices, the Canadian government's plan for fiscal stimulus and sharply reduced expectations for Bank of Canada rate cuts. A run of better-than-expected economic data at the start of the year has also been supportive of the loonie, including employment data on Friday. "Right now everything is working in the Canadian dollar's favor," said Blake Jespersen, managing director, foreign exchange sales at BMO Capital Markets. The currency penetrated key technical support levels, including C$1.2832, its highest since the Bank of Canada last cut interest rates in July. "We had a lot of interest from importers to hedge at those levels ... the market actually took out a lot of resting orders that we had," said Jespersen. "I suspect this still has some room to run." U.S. crude prices were up 3.72 percent to $41.86 a barrel, extending earlier gains after a report that some top oil-producing countries have agreed to freeze output ahead of a much-anticipated OPEC meeting on Sunday. At 2:05 p.m. EDT (1805 GMT), the Canadian dollar was trading at C$1.2765 to the greenback, or 78.34 U.S. cents, much stronger than Monday's close of C$1.2899, or 77.53 U.S. The currency's weakest level of the session was C$1.2921, while it touched its strongest since July 15 last year at C$1.2763. The implied probability of a Bank of Canada interest rate cut this year has dropped to less than 10 percent from more than 50 percent at the start of March. However, Bank of Canada Governor Stephen Poloz is expected to talk up economic risks and play down signs of stronger growth when the central bank sets interest rates on Wednesday. More than half of the analysts in a Reuters poll trimmed their forecasts for Canada's economic growth in 2016. Canadian government bond prices were lower across a steeper maturity curve in sympathy with U.S. Treasuries as Wall Street rallied. The two-year price fell 5.5 Canadian cents to yield 0.585 percent, while the benchmark 10-year was down 52 Canadian cents to yield 1.297 percent. It touched its highest since March 28 at 1.298 percent. (Reporting by Fergal Smith, editing by G Crosse)
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