CANADA FX DEBT-C$ strengthens as economic data supports

Mon Dec 23, 2013 9:48am EST

* Canadian dollar at C$1.0602 or 94.32 U.S. cents
    * Economy grows at 0.3 pct rate in Oct
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Dec 23 (Reuters) - The Canadian dollar strengthened
against the greenback on Monday in what was expected to be a
quiet session as data showed the domestic economy was stronger
than expected in October.
    The loonie held on to earlier gains after gross domestic
product data showed the Canadian economy expanded for a fourth
month in October, by 0.3 percent, beating analysts' expectations
for 0.2 percent growth. 
    "Economically, it's a good sign for the fourth quarter,"
said Greg Moore, FX strategist at TD Securities in Toronto. 
"According to our economists, it suggests the fourth quarter
could be a little bit stronger than the Bank of Canada was
expecting."
    The central bank has forecast annualized GDP growth of 2.3
percent in the fourth quarter.
    Still, the data was unlikely to change the Bank of Canada's
monetary policy after last week's weak inflation report, said
Moore.
    The Canadian dollar was at C$1.0602 to the
greenback, or 94.32 U.S. cents, stronger than Friday's close of
C$1.0648, or 93.91 U.S. cents. 
    Trading was expected to be muted ahead of the Christmas
holiday later in the week.
    At the end of October, the Bank of Canada dropped its
rate-tightening bias, shifting to a more neutral stance, leading
market participants to delay their expectations for when
interest rates will go up.
    The policy shift has weighed on the Canadian dollar, along
with weaker commodity prices and a U.S. Federal Reserve that
last week started to wind down its economic stimulus program.
    The stronger monthly Canadian economic data came on the
heels of surprisingly robust economic growth for the third
quarter in the United States last week.
    The International Monetary Fund predicted over the weekend
the U.S. economy will expand at a faster pace next year.
 
    Markets appeared to shrug off a cash market squeeze in
China. The country's central bank said it has injected 300
billion yuan ($49.41 billion) via short-term liquidity
operations into the interbank market on Friday in response to
rising rates, though it appeared to be trying to force banks to
curb risky lending practices in the shadow banking system.
 
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 2-1/2 Canadian
cents to yield 1.119 percent and the benchmark 10-year
 down 1 Canadian cent to yield 2.677 percent.
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