April 16, 2018 / 8:45 PM / 3 months ago

CANADA FX DEBT-C$ gains with stocks ahead of BoC interest rate decision

 (Adds strategist quotes and details on activity, updates
prices)
    * Canadian dollar at C$1.2573, or 79.54 U.S. cents
    * Bond prices lower across a steeper yield curve
    * 10-year yield touches nearly four-week high at 2.292
percent

    By Fergal Smith
    TORONTO, April 16 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Monday as stocks
rose and investors braced for the potential of a more upbeat
economic assessment by the Bank of Canada at an interest rate
decision this week.
    The central bank has not raised interest rates since
January, mindful of a slowdown in the domestic economy and an 
uncertain outlook for the North American Free Trade Agreement.
    But prospects of a deal to revamp NAFTA have since improved,
oil prices have climbed to a three-year high and inflation has
climbed above the Bank of Canada's 2 percent target.
    "The bank could be in a much more upbeat mood come
Wednesday," said Michael Goshko, corporate risk manager at
Western Union Business Solutions. "The stars are aligned for
something more aggressive than the markets are currently pricing
in."
    Another rate hike is not expected by investors until July,
the overnight index swaps market showed.            But central
bank optimism about the country's economic outlook could raise
expectations for a hike as soon as May.
    Wall Street climbed as investors appeared less concerned
about possible retaliation for the U.S.-led missile attack in
Syria.             
    The commodity-linked Canadian dollar tends to track the
movement in the stock market because of the signal it sends
about prospects for global growth.
    Waning tensions in the Middle East weighed on the price of
oil, one of Canada's major exports. U.S. crude oil futures
       settled 1.7 percent lower at $66.22 a barrel.
    But the prospects for Canadian crude, which tends to trade
at a discount to West Texas Intermediate, improved after
Canadian Prime Minister Justin Trudeau moved the day before to
end an escalating crisis over a Kinder Morgan Canada Ltd
         oil pipeline.             
    At 4 p.m. (2000 GMT), the Canadian dollar CAD=D4 was trading
0.3 percent higher at C$1.2573 to the greenback, or 79.54 U.S.
cents.
    The currency traded in a range of C$1.2566 to C$1.2623. On
Wednesday, the loonie reached its strongest level in more than
seven weeks at C$1.2545.    
    Gains for the loonie came on Monday as the U.S. dollar fell
against a basket of major currencies.             
    Canadian government bond prices were lower across a steeper
yield curve, with the two-year            down 2.5 Canadian
cents to yield 1.877 percent and the 10-year             falling
27 Canadian cents to yield 2.275 percent.
    The 10-year yield touched its highest level since March 21
at 2.292 percent.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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