CANADA FX DEBT-Loonie notches one-week high as Poloz dials back pessimism By Reuters

© Reuters. CANADA FX DEBT-Loonie notches one-week high as Poloz dials back pessimism

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* Canadian dollar rises 0.5% against the greenback

* Canada’s economy shrinks 0.1% in February

* Price of U.S. oil increases 0.7%

* Canada-U.S. 10-year spread narrows by 2.1 basis points

By Fergal Smith

TORONTO, April 30 (Reuters) – The Canadian dollar climbed to a one-week high against a broadly weaker greenback on Tuesday, boosted by higher oil prices and upbeat comments by Bank of Canada Governor Stephen Poloz, but the currency lost ground in April for the third straight month.

At 4:38 p.m. (2038 GMT), the Canadian dollar CAD=D4 was trading 0.5% higher at 1.3391 to the greenback, or 74.68 U.S. cents.

The currency touched its strongest level since April 23 at 1.3382. For April, the was down 0.3%, following declines in February and March but a strong performance in January.

The Canadian economy faces some headwinds but there was good reason to believe growth would accelerate in the second half of this year, Poloz told the House of Commons finance committee. today in his testimony, definitely walked back some of the pessimistic sentiment that was embedded in their previous rate statement,” said Scott Smith, managing partner at Viewpoint Investment Partners.

Last week, the Bank of Canada held interest rates steady at 1.75 percent as it slashed its gross domestic product growth forecast for the year to 1.2 percent from 1.7 percent in January. central bank is buying time for the economy to exit a soft patch without the aid of lower interest rates, economists say, by forecasting growth so weak it would take a surprise blow to activity for the economy to undershoot its estimates. gross domestic product fell by 0.1 percent in February from January, data showed on Tuesday, falling short of analysts’ estimates of no change. price of oil, one of Canada’s major exports, rose as Venezuela’s opposition leader called on the military to back him to end Nicolas Maduro’s rule. U.S. crude oil futures settled up 0.7% at $63.91 a barrel. U.S. dollar fell against a basket of major currencies ahead of a Federal Reserve interest rate decision on Wednesday, as data showing stronger-than-expected first-quarter growth numbers for the euro zone boosted the euro. government bond prices were higher across the yield curve in sympathy with U.S. Treasuries, with the 10-year rising 9 Canadian cents to yield 1.713%.

The gap between Canada’s 10-year yield and its U.S. equivalent narrowed by 2.1 basis points to a spread of 79.2 basis points in favor of the U.S. bond.

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