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CANADA FX DEBT-C$ hangs on as greenback surges after Trump, Fed comments

Published 2017-02-09, 04:50 p/m
© Reuters.  CANADA FX DEBT-C$ hangs on as greenback surges after Trump, Fed comments
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(Adds trader comment, details; updates prices to close)

* Canadian dollar settles at C$1.3141, or 76.10 U.S. cents

* Bond prices lower across flatter yield curve

By Alastair Sharp

TORONTO, Feb 9 (Reuters) - The Canadian dollar posted a narrow gain as its U.S. counterpart surged against other key currencies on Thursday after greenback-boosting comments from U.S. President Donald Trump and a Federal Reserve policymaker.

The commodity-linked Canadian dollar was supported by higher oil prices as an unexpected draw in U.S. gasoline inventories pointed to higher demand in the world's biggest oil market.

The loonie, as Canada's currency CAD=D4 is colloquially known, settled at C$1.3141 per U.S. dollar, or 76.10 U.S. cents, stronger than Wednesday's close of C$1.3155, or 76.02 U.S. cents.

"It's surprising given the (U.S.) dollar strength against other currency pairs after Trump's tax comments and after (Chicago Fed President Charles) Evans' remarks about three rate hikes in 2017 not being unreasonable," said David Bradley, director of foreign exchange trading at Scotiabank.

The currency traded between C$1.3094 to C$1.3167 having rebounded from its weakest in two weeks on Tuesday of C$1.3213.

The greenback posted its best one-day gain against the yen in three weeks and also climbed against the euro, British pound and Swiss franc after Trump said he would make a major announcement on a "phenomenal" tax plan in the next few weeks. Fed President Charles Evans, a voter on policy this year, told reporters it is reasonable to expect the Fed to hike rates three times this year, in part because the early direction of U.S. fiscal policies appear to be positive for the economy. on Thursday, Bank of Canada Deputy Governor Lawrence Schembri said official interest rates here are low enough to stimulate growth and close the output gap by the middle of 2018. for loonie traders will now turn to Canada's employment report for January, due on Friday, which is expected to show no change after 2016's strong second half. ECONCA

"If we do get a significantly weak number tomorrow then maybe we'll trade back up toward C$1.32," Scotia's Bradley said.

Benchmark Brent crude LCOc1 settled up 51 cents at $55.63 per barrel. U.S. light crude CLc1 settled 66 cents higher at $53 a barrel. O/R

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as the number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low. two-year CA2YT=RR fell 6 Canadian cents to yield 0.754 percent and the 10-year CA10YT=RR declined 52 Canadian cents to yield 1.681 percent.

The 10-year yield touched a two-month low at 1.607 percent on Wednesday.

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