October 25, 2016 / 2:02 PM / 10 months ago

CANADA FX DEBT-C$ mostly pares gains as Poloz clarifies remarks

* Canadian dollar at C$1.3346, or 74.93 U.S. cents
    * Bond prices higher across the maturity curve

    TORONTO, Oct 25 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Tuesday but sharp gains made
after its official close on Monday were mostly pared after the
central bank clarified remarks made by Bank of Governor Stephen
Poloz.
    Remarks that were reported on Monday in some media and were
interpreted by the market as conveying a wait-and-see approach
from the central bank had left the market scaling back
expectations for rate cuts. But the central bank later clarified
those remarks in an email.
    "My statement concerning the need to wait 18 months was in
reference to the time frame over which the output gap is
expected to close, as noted in the Bank's October Monetary
Policy Report. It was not intended as a reference to the Bank's
monetary policy," Bank of Canada Governor Stephen Poloz said.   
    
    At 9:28 a.m. EDT (1328 GMT), the Canadian dollar 
was trading at C$1.3346 to the greenback, or 74.93 U.S. cents,
stronger than the Bank of Canada's official close of C$1.3386,
or 74.70 U.S. cents.
    The currency's strongest level of the session was C$1.3277,
while its weakest was C$1.3364.
    The loonie had been on the back foot since the Bank of
Canada acknowledged last week that it had considered cutting
interest rates at its policy meeting.
    It touched its weakest in seven months on Monday at 
C$1.3398.    
    U.S. crude prices were down 0.44 percent at $50.30 a
barrel ahead of the release of U.S. crude inventory data. 
    Canadian government bond prices were higher across the yield
curve, with the two-year price up 4.5 Canadian cents
to yield 0.543 percent and the benchmark 10-year 
rising 7 Canadian cents to yield 1.158 percent.
    The 2-year yield fell 4.2 basis points further below its
U.S. equivalent to leave a spread of -31.7 basis points, its
widest since June 2, as Canadian government bonds outperformed.

 (Reporting by Fergal Smith; Editing by Dan Grebler)

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