CANADA FX DEBT-C$ strengthens on solid domestic data, higher oil prices
* Canadian dollar at C$1.2671, or 78.92 U.S. cents * Bond prices lower across the maturity curve (New throughout, updates prices and market activity, adds comments and details) By Fergal Smith TORONTO, April 22 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday as stronger-than-expected domestic data and a rebound in oil prices helped the loonie rack up its fourth week of gains in a row. Canadian retail sales unexpectedly climbed in February, while core inflation was more robust than expected in March. "It certainly does underscore the surprising resilience we have seen in the Canadian economy over the last few months of data," said Andrew Kelvin, senior rates strategist at TD Securities. Oil prices rose as market sentiment turned more upbeat on signs the persistent supply glut may be easing. U.S. crude prices settled at $43.73 a barrel, up 1.27 percent. The currency has rallied 16 percent since falling to a 12-year low in January, helped by rebounding oil prices and a shift in expectations for the direction of Bank of Canada interest rates. The implied probability of a Bank of Canada rate hike this year rose to 14 percent from near zero before the data, overnight index swaps (OIS) showed. At the start of March, the OIS market had implied a more than 50 percent chance of a cut. While analysts said the loonie could have more room to run, they warned there were a number of risk factors that could derail it, including weaker-than-expected economic data or a change in rate expectations for either the Bank of Canada or the U.S. Federal Reserve. "If you are long Canadian dollar ... you want to keep a fairly tight leash on it," said Amo Sahota, director at Klarity FX in San Francisco. The Canadian dollar ended the North American trading session at C$1.2671 to the greenback, or 78.92 U.S. cents, stronger than Thursday's official close of C$1.2727, or 78.57 U.S. cents. The loonie gained 1.2 percent for the week. Since late January, the currency has seen only one down week. Speculators increased bullish bets on the loonie, Commodity Futures Trading Commission data showed. Net long Canadian dollar positions rose to 7,308 contracts in the week ended April 19 from 2,385 contracts in the prior week. Canadian government bond prices were lower across the maturity curve, underperforming U.S. Treasuries. The two-year price fell 8.5 Canadian cents to yield 0.678 percent and the new benchmark 10-year was down 36 Canadian cents to yield 1.495 percent. The 10-year yield touched its highest since Dec. 16 at 1.498 percent. (Additional reporting by Leah Schnurr in Ottawa; Editing by David Gregorio)
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