May 1, 2018 / 1:36 PM / in 4 months

CANADA FX DEBT-C$ firms vs stronger greenback, boosted by GDP rise

    * Canadian dollar at C$1.2836, or 77.91 U.S. cents
    * Canadian economy grows 0.4 percent in February
    * Bond prices lower across the yield curve

    TORONTO, May 1 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Tuesday, as
stronger-than-expected domestic economic growth in February
offset a drop in oil prices and broader gains for the greenback.
    The Canadian economy grew 0.4 percent in February,
Statistics Canada said, a sign that first-quarter growth could
be stronger than the Bank of Canada is predicting. Analysts had
forecast February gross domestic product would increase by 0.3
percent.             
    The Bank of Canada has hiked interest rates three times
since July. But recent comments by central bank officials have
been seen as dovish by some investors.
    Chances of a hike at the May 30 interest rate announcement
have been dialed back to about 25 percent from nearly 50 percent
in mid-April, data from the overnight index swaps market showed.
          
    Bank of Canada Governor Stephen Poloz will give a speech on
Tuesday to the Yellowknife Chamber of Commerce. The central bank
will release his prepared remarks at 2:30 p.m. EDT (1830 GMT).  
    The price of oil, one of Canada's major exports, slid as the
U.S. dollar remained near a four-month high.             
    The U.S. dollar surged into positive territory for 2018 and
broke past key levels against several currencies as a divergence
between growth and the interest rate outlook versus other
countries spurred investors to chase the greenback higher.
            
    At 9:20 a.m. EDT (1320 GMT), the Canadian dollar         
was trading 0.1 percent higher at C$1.2836 to the greenback, or
77.91 U.S. cents. The currency traded in a range of C$1.2822 to
C$1.2879.
    The modest gain for the loonie came as U.S. President Donald
Trump postponed the imposition of steel and aluminum tariffs on
Canada, the European Union and Mexico until June 1. Temporary
exemptions from the tariffs on these countries were set to
expire on Tuesday.                 
    The latest U.S. proposal for increasing the North American
Free Trade Agreement's regional automotive content would carry a
four-year phase-in to meet a higher, 75 percent regional value
threshold and new labor content rules requiring substantial work
at wages of $16 an hour or higher.             
    Canadian government bond prices were lower across the yield
curve, with the two-year            down 5 Canadian cents to
yield 1.919 percent and the 10-year             falling 16
Canadian cents to yield 2.327 percent.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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