CANADA FX DEBT-Canadian dollar firms to near 9-month high as oil jumps

Tue Apr 12, 2016 4:50pm EDT
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(Updates prices)
    * Canadian dollar ended at C$1.2759, or 78.38 U.S. cents
    * Loonie touches strongest since last July 15 at C$1.2750.
    * 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
    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 settled at $42.17 a barrel, up 4.48
percent, after a report that top producers Russia and Saudi
Arabia have agreed to freeze output ahead of a much-anticipated
producers meeting on Sunday. 
    The Canadian dollar ended at C$1.2759 to the
greenback, or 78.38 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      
    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.     
    Still, the implied probability of a Bank of Canada interest
rate cut this year has dropped to 10 percent from more than 50
percent at the start of March.    
    Canadian government bond prices were lower across a steeper
maturity curve in sympathy with U.S. Treasuries as Wall Street
    The two-year price fell 5 Canadian cents to yield
0.582 percent, while the benchmark 10-year was down
48 Canadian cents to yield 1.292 percent. The 10-year yield
touched its highest since March 28 at 1.304 percent.
    More than half of the analysts in a Reuters poll trimmed
their forecasts for Canada's economic growth in 2016.

 (Reporting by Fergal Smith, editing by G Crosse and Dan