January 31, 2018 / 2:31 PM / in 9 months

CANADA FX DEBT-C$ reaches 4-month high as economy strengthens, greenback falls

    * Canadian dollar at C$1.2291, or 81.36 U.S. cents
    * Loonie touches its strongest since Sept. 20 at C$1.2250
    * Bond prices mixed across flatter yield curve
    * 2-year yield touches its highest in 6-1/2 years

    By Fergal Smith
    TORONTO, Jan 31 (Reuters) - The Canadian dollar strengthened
to a four-month high against its U.S. counterpart on Wednesday
as the greenback broadly fell ahead of a Federal Reserve
interest rate decision and after data showed strong growth in
Canada's economy in November.
    At 9:13 a.m. EST (1413 GMT), the Canadian dollar         
was trading 0.3 percent higher at C$1.2291 to the greenback, or
81.36 U.S. cents. The currency touched its strongest since Sept.
20 at C$1.2250.
    Canadian gross domestic product rose by 0.4 percent in
November from October, Statistics Canada said. The increase was
in line with economists' expectations and the biggest gain since
May 2017.             
    The data supported expectations for growth to accelerate in
the fourth quarter, but likely not as fast as the 2.5 percent
annualized gain that the Bank of Canada has projected, Ryan
Brecht, a senior economist at Action Economics, said in a
research note.
    The central bank has raised interest rates three times since
July. Money markets expect another hike by May.           
    The U.S. dollar        fell against a basket of major
currencies after a pickup in eurozone underlying inflation
helped support the euro.             
    Financial markets expect the Fed to take a more confident
stance about the outlook of the economy but keep policy
unchanged.             
    On Tuesday, U.S. President Donald Trump called on the U.S.
Congress to pass legislation to ensure at least $1.5 trillion in
new infrastructure spending.              
    The price of oil, one of Canada's major exports, fell for a
third day after data that showed U.S. inventories rose more than
expected.             
    U.S. crude        prices were down 0.37 percent to $64.26 a
barrel.
    Canadian government bond prices were mixed across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           dipped 1 Canadian cent to yield 1.836 percent and the
10-year             climbed 9 Canadian cents to yield 2.282
percent.
    The 2-year yield touched its highest since June 2011 at
1.849 percent.

    
 (Reporting by Fergal Smith; Editing by Nick Zieminski)
  
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