February 1, 2018 / 9:31 PM / in 9 months

CANADA FX DEBT-C$ climbs on higher oil prices, domestic economic strength

    * Canadian dollar at C$1.2269, or 81.51 U.S. cents
    * Oil prices rise 1.7 percent
    * Bond prices lower across a steeper yield curve
    * 10-year yield touches its highest since May 2014

    By Fergal Smith
    TORONTO, Feb 1 (Reuters) - The Canadian dollar rose against
its broadly weaker U.S. counterpart on Thursday, boosted by
higher oil prices and data the day before that showed strong
growth in the domestic economy.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading 0.3 percent higher at C$1.2269 to the greenback, or
81.51 U.S. cents.
    The currency traded in a range of C$1.2261 to C$1.2331. On
Wednesday, it touched its strongest in more than four months at
C$1.2250.
    "This looks to me like an extension of the move we saw
yesterday after the GDP print and also reflective of the
defensive tone in the U.S. dollar overall," said Bipan Rai,
executive director and senior macro strategist at CIBC Capital
Markets.
    The Canadian economy accelerated in November by the most in
six months, keeping the Bank of Canada on track to raise
interest rates again before long.             
    Money markets expect a rate hike by May, the overnight index
swaps market indicates.           
    On Thursday, data showed that the pace of growth in the
Canadian manufacturing sector picked up at the start of the year
to its highest level in nine months.              
    "An improved mood in NAFTA negotiations" has added to
support for the loonie, Rai said.
    Canadian Prime Minister Justin Trudeau said on Wednesday he
did not think U.S. President Donald Trump would pull out of the
North American Free Trade Agreement.                         
    The price of oil, one of Canada's major exports, rose after
a survey showed commitment by the Organization of the Petroleum
Exporting Countries to supply cuts remains in place.
            
    U.S. crude oil futures        settled 1.7 percent higher at
$65.80 a barrel.
    The Canadian dollar is ditching its close shadowing of yield
spreads, clearing the way for other metrics to drive the
currency, as interest rate hike cycles in North America become
more established and investors bet on a weaker greenback.
                     
    The U.S. dollar        fell against a basket of major
currencies after Federal Reserve comments on Wednesday about
rising inflation this year failed to give a lasting boost to the
currency.             
    Canadian government bond prices fell across a steeper yield
curve in sympathy with U.S. Treasuries.
    The 10-year             fell 60 Canadian cents to yield
2.368 percent. Its yield touched its highest intraday since May
2014 at 2.383 percent.

 (Reporting by Fergal Smith; Editing by Chizu Nomiyama and David
Gregorio)
  
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