January 31, 2017 / 9:36 PM / in 9 months

CANADA FX DEBT-C$ posts a 4-month high on GDP data, weaker greenback

(Adds analyst quotes and details on U.S. dollar and updates
prices)
    * Canadian dollar ends at C$1.3012, or 76.85 U.S. cents
    * Loonie touches its strongest since Sept. 9 at $1.2969
    * Canadian bond prices rise across the yield curve

    By Fergal Smith
    TORONTO, Jan 31 (Reuters) - The Canadian dollar notched a
four-month high against its U.S. counterpart on Tuesday after
domestic data showed the economy expanded more than expected in
November and the greenback tumbled against a basket of major
currencies.
     The U.S. dollar index slumped below the 100.00
threshold after comments by U.S. President Donald Trump and his
trade adviser stoked expectations that the new U.S.
administration was targeting a weaker greenback. 
    "A large part of what Canada has been through has been a
bloom coming off the rose for the U.S. dollar," said Mark
Chandler, head of Canadian fixed income and currency strategy.
    Many market participants had bought U.S. dollars on the hope
of policies such as tax reform, but without worrying about parts
of Trump's policy agenda that hinder growth, Chandler added. 
    The Canadian economy grew 0.4 percent in November from
October, helped by a rebound in manufacturing. That beat the 0.3
percent increase forecast by analysts. 
    U.S. crude prices settled 18 cents higher at $52.81 a
barrel, helped by news that major suppliers cut production this
month more than forecasters had expected. 
    Oil is one of Canada's major exports.
    The Canadian dollar ended at C$1.3012 to the
greenback, or 76.85 U.S. cents, stronger than Monday's close of
C$1.3120, or 76.22 U.S. cents.
    The currency's weakest level of the session was C$1.3124,
while it touched its strongest since Sept. 9 at $1.2969.
    For the month, the loonie rose 3.2 percent after having
climbed 3.1 percent in 2016.
    The market awaited a speech by Bank of Canada Governor
Stephen Poloz on economic modeling and monetary policy. The
central bank will release his prepared remarks at 5:20 p.m. ET
(2220 GMT).
    Earlier this month, Poloz said an interest rate cut remained
"on the table" if the risks facing the country are realized,
warning there would be "material consequences" if Trump enacts
protectionist policies.
    "He is still going to be cautious" even if he acknowledges
the recent strength of domestic data, said Chandler.
    He expects the U.S. Federal Reserve to reinforce the risk of
higher inflation in its interest rate decision on Wednesday and
for that to weigh on the Canadian dollar against the greenback. 
  
    Canadian government bond prices were higher across the yield
curve as bonds benefited from safe-haven demand. The two-year
 rose 4.5 Canadian cents to yield 0.773 percent and
the 10-year climbed 21 Canadian cents to yield 1.759
percent.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli and
Tom Brown)

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