* C$ gains to 98.57 U.S. cents
* Bonds weaker ahead of Fed rate decision
* Manufacturing, productivity data firmer than expected
* More to strong C$ than commodity prices -Flaherty
(Updates with currency's high, finance minister's comments)
TORONTO, March 16 (Reuters) - The Canadian dollar hit its
highest level since July 2008 on Tuesday, boosted by firmer oil
and equities prices and by data that provided more proof the
Canadian economy is moving to a surer footing.
The currency reached C$1.0145 to the U.S. dollar, or 98.57
U.S. cents, its highest level in 20 months, resuming its upward
march after pausing Monday when investors took a break after an
11-day stretch of gains.
Canada's economic recovery is picking up pace with figures
on Tuesday showing January manufacturing sales higher than
expected and labor productivity rising for the first time in
more than a year. [ID:nN16249105]
"Certainly it's pointing to solid growth being sustained,"
said Paul Ferley, assistant chief economist at Royal Bank of
Canada. "At the moment, we're still of the view that we'll see
some moderation from the 5 percent (GDP) gain in the fourth
He said the data is consistent with his forecast that
first-quarter growth will be just under 4 percent, although it
could be higher if statistics continue to come in very firm.
At 11 a.m. (1500 GMT), the Canadian dollar was at C$1.0149
to the U.S. dollar, or 98.53 U.S. cents, up from Monday's close
at C$1.0197 to the U.S. dollar, or 98.07 U.S. cents.
Oil also supported the currency as it advanced above $81 a
barrel in a cautious market ahead of an OPEC meeting and
monetary policy moves expected from the world's top two oil
consumers, the United States and China. [O/R]
Stock markets also moved higher.
Finance Minister Jim Flaherty said the upward pressure on
the Canadian dollar is coming from more than just commodity
prices. [ID:nN16248351] [ID:nLDE62F1LZ]
"There has been some upward pressure on the Canadian dollar
as we all know, and some other currencies, reflecting the
weakness in the U.S. dollar," Flaherty said.
"It's a market currency and we be believe in markets and
when you believe in markets you have to let your currency
The U.S. Federal Reserve's open market committee was
holding a one-day meeting on Tuesday at which it was expected
to reiterate its vow to keep interest rates very low for an
While the Fed is expected to hold rates steady, the market
is looking for any hints about the Fed's assessment of the
economic outlook, said Firas Askari, head of foreign exchange
trading at BMO Capital Markets.
Canadian bond prices were mixed on Tuesday before the Fed's
policy decision later in the day. The two-year government bond
dipped 2 Canadian cents to C$99.87 to yield 1.570
percent, while the 10-year bond was up 13 Canadian
cents to C$102.14 to yield 3.476 percent.
(Additional reporting by Jennifer Kwan; editing by Peter