CANADA FX DEBT-Canada dollar up on Poloz comments, inflation data

Mon Feb 24, 2014 4:35pm EST

* Canadian dollar at C$1.1067, or 90.36 U.S. cents
    * Bond prices lower across the maturity curve


    By Leah Schnurr and Alastair Sharp
    TORONTO, Feb 24 (Reuters) - The Canadian dollar strengthened
against the greenback on Monday, stabilizing after recent losses
and as this week's light economic calendar left the loonie with
few near-term catalysts.
    Investors were taking in comments from Bank of Canada
Governor Stephen Poloz made over the weekend that two months of
stronger domestic inflation has made the central bank feel a
little more comfortable. 
    The comments, coupled with inflation data on Friday, pushed
investors to trim bets on an interest rate cut.
    "The Bank of Canada essentially won't have much fuel to
sound any more dovish at their next meeting," Greg Moore, senior
currency strategist at Royal Bank of Canada.
    But he said with North American monetary policy seemingly on
cruise control, it would take a sharp external development to
push the loonie much further in either direction.
    "Perhaps another month or two of data development will be
required before we see any strong trends develop in
dollar/Canada again," Moore said.
    Data on Friday showed Canada's annual inflation rate jumped
to its highest in 1-1/2 years in January. At its most recent
meeting last month, the Bank of Canada said it had become more
concerned about weak inflation. 
    The Canadian dollar also benefited from a slight improvement
in the appetite for risk in the markets, said Scott Smith,
senior market analyst at Cambridge Mercantile Group in Calgary.
    "With the absence of domestic data until really Friday,
we'll be in a bit of a consolidative pattern. I could see the
loonie gaining a little bit of strength after that sharp
sell-off we saw earlier last week," Smith said.
    The Canadian dollar ended at C$1.1067 to the
greenback, or 90.36 U.S. cents, stronger than Friday's close of
C$1.1133, or 89.82 U.S. cents.
    If the currency pair continues to consolidate, the Canadian
dollar could firm to as far as about C$1.1020, while any
declines should be capped in the low C$1.11 area over the next
day or two, Smith said.  
    The loonie tumbled last week, interrupting February's run
higher after the currency hit a 4-1/2-year low at the end of
January. The U.S. dollar appreciated by about 1 percent against
the loonie last week. 
    Investors will have to wait until Thursday's current account
figures before they get any significant Canadian economic data.
But Friday will be the main focus when fourth-quarter gross
domestic product will be released. Growth is expected to slip to
an annualized 2.5 percent in the fourth quarter. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 3 Canadian
cents to yield 1.027 percent and the benchmark 10-year
 down almost 3 Canadian cents to yield 2.522 percent.
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