CANADA’S FX DEBT – Canadian Dollar Holds Near 3-Year High as Investors Assess Inflation Risk

(Adds quotes and strategist details throughout; updates pricing) * Loonie trades in range 1.2585-1.2647 * US oil price rises 0.1% * Yield 10-year Canadian dollar hits a one-year high of 1.278% By Fergal Smith TORONTO, February 23 (Reuters) – The Canadian dollar was little changed against the greenback on Tuesday, holding near its highest level in nearly three years as investors weighed the prospects of higher inflation and the Bank of Canada said rolling out vaccines would boost the economy. The Canadian dollar was trading almost unchanged at 1.2606 against the greenback, or 79.33 US cents, after trading in a range of 1.2585 to 1.2647. On Monday, the loonie touched its highest intraday level since April last year at 1.2576. The U.S. dollar reversed early gains after a dovish speech by U.S. Federal Reserve chief Jerome Powell failed to quell inflation fears. “An inflationary surprise would be extremely bullish for the Canadian dollar given the abundant resources in Canada,” said Adam Button, chief currency analyst at ForexLive. The price of oil, one of Canada’s top exports, was trading near its highest in more than a year, in signs that global coronavirus restrictions were easing. U.S. crude rose 0.1% to $61.75 a barrel. Canada’s economy will see a strong rebound in the coming months as COVID-19 restrictions ease, and an expected ramp-up in vaccination bolsters confidence in strong and sustained growth through 2022, the Minister said. Bank of Canada Governor Tiff Macklem to an Alberta business audience. Still, Button said, there was no indication in the speech that Macklem intended “to hit the brakes on the recovery anytime soon.” Canadian government bond yields were higher on a steeper curve. The 10-year hit its highest since February last year at 1.278% before plunging to 1.262%, up 3.1 basis points on the day. (Reporting by Fergal Smith; Editing by Alistair Bell and Dan Grebler)

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