October 15, 2018 / 4:21 PM / a month ago

CANADA FX DEBT-C$ rallies as business optimism backs further rate hikes

 (Adds strategist quotes, details on activity; updates prices)
    * Canadian dollar rises 0.4 percent against the greenback
    * Loonie touches its strongest since Oct. 10 at 1.2955
    * Bank of Canada survey shows business optimism near
record-levels
    * Resales of Canadian homes dip 0.4 percent in September

    By Fergal Smith
    TORONTO, Oct 15 (Reuters) - The Canadian dollar strengthened
to its highest in five days against its U.S. counterpart on
Monday, after a quarterly business survey by the Bank of Canada
supported bets for another interest rate hike from the central
bank as soon as next week.
    Canadian business optimism remained at near-record levels in
the third quarter as companies reported rising pressure on
capacity, labor and prices amid signs of stronger sales, the
Bank of Canada said.             
    The central bank has hiked interest rates four times since
July 2017 to leave its policy rate at 1.50 percent. Chances of
another hike at the Oct. 24 announcement stayed at nearly 90
percent after the data, the overnight index swaps market
indicated.               
    "It supports the outlook for higher rates in Canada and
particularly toward the end of this month," said Shaun Osborne,
chief currency strategist at Scotiabank. "The fact that we got
such a positive read, particularly on business investment,
before there was clarity on the trade outlook, I think was quite
encouraging."
    All the interviews were carried out before Canada and the
United States struck a deal on Sept. 30 on a new trade pact with
Mexico.             
    At 11:55 a.m. (1555 GMT), the Canadian dollar          was
trading 0.4 percent higher at 1.2968 to the greenback, or 77.11
U.S. cents. The currency touched its strongest since Oct. 10 at
1.2955.
    Last week, the loonie declined 0.6 percent as worries over
higher bond yields and the impact of trade tariffs contributed
to volatility in global financial markets.    
    Still, speculators have cut bearish bets on the Canadian
dollar to the lowest since March, data from the U.S. Commodity
Futures Trading Commission and Reuters calculations showed on
Friday. As of Oct. 9, net short positions had decreased to
12,145 contracts from 18,484 a week earlier.
    U.S. crude        prices were down 0.1 percent at $71.28 a
barrel. The disappearance of a prominent Saudi journalist has
raised tensions between the United States, the world's top oil
consumer, and Riyadh, one of the biggest oil producers. That was
offset by the long-term demand outlook.             
    Oil is one of Canada's largest exports.
    Resales of Canadian homes dipped 0.4 percent in September
from August, the first decline since April, the Canadian Real
Estate Association said.                 
    Canadian government bond prices were lower across a flatter
yield curve, with the 10-year             falling 6 Canadian
cents to yield 2.507 percent.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Susan Thomas)
  
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