March 14, 2018 / 8:14 PM / 2 years ago

CANADA FX DEBT-Loonie rises with oil prices as traders absorb rate outlook

    * Canadian dollar at C$1.2947 or 77.24 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quotes, updates prices)
    By Leah Schnurr
    March 14 (Reuters) - The Canadian dollar strengthened
against the greenback on Wednesday, boosted by a rise in oil
prices after strong Chinese factory activity lifted investor
enthusiasm for commodities.
    With little in the way of domestic drivers to influence the
loonie, the currency followed oil around in a choppy session,
while traders were also consolidating positions the day after
dovish comments from the Bank of Canada.
    The loonie was able to recover some of Tuesday's nearly 1
percent decline after the head of the central bank Stephen Poloz
said a degree of untapped potential remains in the Canadian
labor market, reinforcing expectations the central bank will
take its time raising interest rates further.             
    "People have digested the remarks from Poloz, I think most
of it now is priced in," said Rahim Madhavji, president at
    "It's basically setting everyone up for kicking the can down
the road in terms of rate hikes," said Madhavji. "It's taken
some probability of multiple rate hikes potentially off the
    At 4:00 p.m. EDT (2000 GMT), the Canadian dollar         
was trading up 0.1 percent at C$1.2947 to the greenback, or
77.24 U.S. cents.
    The central bank has raised rates three times since July
2017 and has said it will be cautious in considering further
moves. Markets see an 80 percent likelihood that the bank hikes
again in July.           
    Data showed China's industrial output grew 7.2 percent in
the first two months of the year compared with the year before,
topping expectations and boosting optimism over the outlook for
    China is the world's second-largest economy and the world's
largest importer of commodities. 
    Oil prices were also boosted by a larger-than-expected build
in crude stocks. U.S. crude        prices settled up 25 cents at
$60.96 a barrel.      
    Canadian government bond prices were higher across the
maturity curve, with the two-year            price up 3 Canadian
cents to yield 1.774 percent and the benchmark 10-year
            rising 32 Canadian cents to yield 2.163 percent.

 (Reporting by Leah Schnurr in Ottawa
Editing by Bernadette Baum and David Gregorio)
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