March 3, 2016 / 9:29 PM / 4 years ago

CANADA FX DEBT-C$ strengthens to new 12-week high against weaker greenback

(Adds dealer quotes, details on U.S. data, updates prices)
    * Canadian dollar ended at C$1.3396, or 74.65 U.S. cents
    * Falls to a one-week low of C$0.9884 vs Aussie dlr
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, March 3 (Reuters) - The Canadian dollar
strengthened to a 12-week high against its U.S. counterpart on
Thursday as base and precious metal prices rallied, although it
underperformed other commodity-related and European currencies.
    The currency extended its recovery from a 12-year low in
January at $1.4689 as weaker U.S. data weighed on the greenback
ahead of Friday's U.S. jobs report. 
    "The U.S. economy is growing but not quite at the trajectory
that the Fed and other market participants are hoping for," said
Lennon Sweeting, a foreign exchange dealer at USForex.
    The U.S. service sector expanded in February at a slightly
slower pace than the previous month and employment in the sector
declined for the first time in two years. 
    "The market is starting to realize that the greenback is
pretty significantly overpriced given that a rate hike isn't
looking as likely," Sweeting added.
    Recent strength in commodity markets helped support Canada's
commodity-linked currency.
    U.S. crude prices ended a three-day rally, settling
slightly lower at $34.57 a barrel. 
    Copper prices hit their highest in more than three months,
while gold climbed to a nearly 13-month high.
    The Canadian dollar ended at C$1.3396 to the
greenback, or 74.65 U.S. cents, stronger than Wednesday's close
of C$1.3427, or 74.48 U.S. cents.
    The currency's weakest level of the session was C$1.3473,
while it touched its strongest since Dec. 7 at C$1.3372.
    Domestic data on Tuesday showed the economy slowed
less-than-expected in the fourth quarter. 
    It wasn't "poor enough" to warrant a Bank of Canada rate
cut, said Sweeting, "especially with oil rebounding." 
    The implied probability of a rate cut this year has fallen
to 47 percent from 80 percent last week when Finance Minister
Bill Morneau said the government would stick to plans to
stimulate the economy in a March 22 federal budget.
    Still, the currency fell to a one-week low of C$0.9884
against the Australian dollar, while it also lost ground against
the euro, touching C$1.4700 at its weakest.
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 3 Canadian
cents to yield 0.518 percent and the benchmark 10-year
 rising 25 Canadian cents to yield 1.222 percent.
    On Wednesday, the 10-year yield touched its highest since
Jan. 28 at 1.302 percent.
    January trade data is due on Friday, expected to reveal a
widening deficit of C$1.10 billion after shrinking sharply the
month before. Analysts will be looking to see if exports can
maintain momentum. 

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
David Gregorio)
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