June 30, 2017 / 9:25 PM / 3 years ago

CANADA FX DEBT-C$ notches 9-month high on oil price climb, rate hike bets

    * Canadian dollar at C$1.2967, or 77.12 U.S. cents
    * Loonie touches its strongest since Sept. 9 at C$1.2947
    * Bond prices lower across the yield curve

    By Alastair Sharp
    TORONTO, June 30 (Reuters) - The Canadian dollar hit a
nine-month high against its U.S. counterpart on Friday, boosted
by higher oil prices and domestic growth which supported the
Bank of Canada's recent switch to a more hawkish stance.
    The central bank also said Canadian companies were more
optimistic about future sales and exports, while improving
demand was driving capacity pressures that should boost
investment and hiring, in a report on Friday that further
increased expectations for a rate hike.             
    At 4 p.m. ET (2000 GMT), the Canadian dollar          was
trading at C$1.2967 to the greenback, or 77.12 U.S. cents, up
0.3 percent. It touched its strongest since Sept. 9 at C$1.2947
during the session.
    But further appreciation for the currency will require
follow-through on the newly hawkish tone, according to Brad
Schruder, a director of foreign exchange sales at BMO Capital
    "The Bank of Canada has talked the talk and now they need to
walk the walk," he said. "In addition, they need to convince the
market that this is the beginning of cycle towards tighter
monetary policy rather than just removal of the emergency cut
Governor Poloz put in a couple of years ago."
    Speculators cut bearish bets on the Canadian dollar for a
fifth straight week, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed. Canadian
dollar net short positions tumbled to 49,495 contracts as of
June 27 from 82,881 a week earlier.
    Canada's economy expanded by 0.2 percent in April after a
0.5 percent increase in March, Statistics Canada said. The gain
matched analysts' estimates.             
    It leaves the economy on track to grow at a 2.5 percent pace
in the second quarter, which is "more than enough to justify the
recent change in tone from the Bank of Canada," Avery Shenfeld,
chief economist at CIBC Capital Markets said in a research note.
    Chances of a Bank of Canada rate hike in July have increased
to one-in-two from just 20 percent after subdued inflation data
last week, data from the overnight index swaps market shows.
    Oil prices climbed for a seventh straight session in their
longest bull run since April but were still set for the worst
first-half performance since 1998.             
    U.S. crude futures        settled up $1.11, or around 2.5
percent, at $46.04 a barrel.
    The two-year            price dipped 3.5 Canadian cents to
yield 1.100 percent and the 10-year             declined 48
Canadian cents to yield 1.762 percent.

 (Additional reporting by Fergal Smith; Editing by Richard
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