CANADA FX DEBT-C$ gains, near one-week high, on data and ECB move

Thu Sep 4, 2014 9:34am EDT

* Canadian dollar at C$1.0847 or 92.19 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Leah Schnurr
    TORONTO, Sept 4 (Reuters) - The Canadian dollar firmed to
its highest in nearly a week against the greenback on Thursday,
rising along with investors' risk appetite after the European
Central Bank cut interest rates to record lows to spur growth
and thwart a deflation threat.
    The loonie got an additional boost from data that showed the
country's trade surplus jumped in July to a nearly six-year high
 as exports rose. The report sent the loonie to a fresh session
high. 
    "The trade number was very impressive," said Mark Chandler,
head of Canadian fixed income and currency strategy at Royal
Bank of Canada in Toronto.
    Policymakers are looking for the struggling export sector to
become a bigger driver of Canadian economic growth, taking over
from the boom in household debt.
    Chandler expects the Bank of Canada will have to revise its
growth forecasts higher at its next meeting in October.
    "We've got a full percentage point stronger growth in the
third quarter than the bank was last monitoring, so if we're
correct, it's going to see a revised forecast," he said. 
    "I would like to see them say at that point they have a
tightening bias going forward, talk about an eventual removal of
monetary accommodation, but they've been reluctant to do so in
the past."
    The currency had surged heading into the report after the
ECB cut its main refinancing rate to 0.05 percent and launched a
new program to pump money into the euro zone economy. The
Canadian dollar firmed against its other major currency crosses,
and was strongly higher against the euro. 
    The Canadian dollar was at C$1.0847 to the
greenback, or 92.19 U.S. cents, stronger than Wednesday's close
of C$1.0888, or 91.84 U.S. cents.
    The euro was down at C$1.4122 as investors monitored a press
conference from ECB President Mario Draghi. 
    Canadian government bond prices were mostly lower across the
maturity curve, though the two-year was unchanged to
yield 1.120 percent. The benchmark 10-year was down
12 Canadian cents to yield 2.099 percent.

 (Editing by Bernadette Baum)
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