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

Fri Feb 28, 2014 4:30pm EST

* Canadian dollar at C$1.1074 or 90.30 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-than-expected pace 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 had
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 reaction immediately after the report, the
Canadian dollar strengthened. Investors also took in data south
of the border that showed U.S. growth in the fourth quarter was
revised lower. 
    The Canadian dollar ended the North American
session at C$1.1074 to the greenback, or 90.30 U.S. cents,
stronger than Thursday's close of C$1.1136, or 89.80 U.S. cents.
    The loonie also got some lift from investors squaring
positions on the last day of the month, said Greg Anderson,
global head of foreign exchange strategy at BMO Capital Markets
in New York.
    "Markets came into month-end short Canadian dollar, so the
fact that they were buying back some of those shorts throughout
the morning is not a surprise," Anderson said.
    The loonie firmed in the first three weeks of February, but
dropped sharply last week after disappointing wholesale trade
data and has been drifting sideways since. The greenback
weakened 0.6 percent against the Canadian dollar for the month.
    "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 is 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 2 Canadian
cents to yield 1.001 percent and the benchmark 10-year
 down 17 Canadian cents to yield 2.433 percent.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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