CANADA FX DEBT-C$ firms on stronger-than-expected economic growth data

Fri Feb 28, 2014 9:30am EST

* Canadian dollar at C$1.1088 or 90.19 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Feb 28 (Reuters) - The Canadian dollar firmed
against the greenback on Friday after data showed the domestic
economy grew at a faster pace than had been expected in the
final months of last year.
    Canada's economy expanded at a 2.9 percent annualized rate
in the fourth quarter, surpassing the 2.5 percent economists has
forecast. Growth for the first two quarters of 2013 was also
revised higher. 
    "All told, a pretty decent quarter, which is a bit ahead of
what the Bank of Canada had forecast," said David Tulk, chief
Canada macro strategist at TD Securities in Toronto.
    After some choppy initial reaction immediately after the
report, the Canadian dollar firmed to a session high. Investors
were also taking in data south of the border that showed U.S.
growth in the fourth quarter was revised lower. 
    The Canadian dollar was at C$1.1088 to the
greenback, or 90.19 U.S. cents, stronger than Thursday's close
of C$1.1136, or 89.80 U.S. cents.
    The loonie firmed in the first three weeks of February, but
the currency dropped sharply last week after disappointing
wholesale trade data and it has been drifting largely sideways
since. Still, the Canadian dollar is not far from the 4-1/2-year
low of C$1.1225 hit at the end of January.
    "I think this consolidation phase that we've been in since
the beginning of February is probably something that won't go
away any time soon. We're still likely to see a bit more
sideways price action and even lower levels in U.S.
dollar-Canadian dollar, in my mind," said Greg Moore, senior
currency strategist at Royal Bank of Canada in Toronto.
    The Bank of Canada meets next week and, with the central
bank expected to hold rates at 1 percent, investors will be
watching the accompanying statement closely for any changes in
language. 
    "Given the fact that there's not really much ahead of the
Bank of Canada meeting next week and expectations heading into
that are fairly neutral - that they're not going to be able to
change their message - suggests we're not going to get much new
to drive the Canadian dollar lower," said Moore.
    Canadian government bond prices were lower across the
maturity curve, with the two-year off 3 Canadian
cents to yield 1.007 percent and the benchmark 10-year
 down 27 Canadian cents to yield 2.444 percent.
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