CANADA FX DEBT-Loonie rallies as Canadian economy beats expectations

(Adds strategist quote and details throughout; updates pricing) * The Canadian dollar strengthens 0.4% against the greenback * The Canadian economy grows 0.4% in October * The U.S. oil price stands 2.3% higher * Canada’s 10-year yield rises 3.3 basis points to 0.736% By Fergal Smith TORONTO, Dec 23 (Reuters) – The Canadian dollar rose strengthened against its U.S. counterpart on Wednesday as risk appetite increased and domestic data showed the economy growing more than expected in October, with the currency recovering some of this week’s decline. The loonie was trading up 0.4% at 1.2856 against the greenback, or 77.78 US cents, after trading in a range of 1.2833 to 1.2914. “Slight risk to sentiment today helped lift oil and the loonie,” said Amo Sahota, head of Klarity FX in San Francisco. US stocks gained as investors appeared to have ignored President Donald Trump’s threat not to sign a COVID-19 relief bill and data showed a drop in the number of first-time Americans filing claims unemployment benefits. The price of oil, one of Canada’s main export commodities, rebounded from earlier losses caused by an unexpected increase in crude oil inventories in the United States. U.S. crude oil futures settled up 2.3% at $48.12 a barrel. The Canadian economy grew 0.4% in October from September, beating the 0.3% pace forecast by economists. A flash estimate for November showed a further expansion of 0.4%. October’s GDP data was “encouraging” for the loonie, but the recent tightening of restrictions to contain a second wave of coronavirus will provide headwinds to the economy, Sahota said. Investors also fear that a new variant of the coronavirus, discovered spreading rapidly in the south of England, could threaten a vaccine-led recovery in the global economy. The loonie has fallen 0.6% since the start of the week. Canada on Wednesday approved Moderna Inc’s coronavirus vaccine, the second country to do so. Yields on Canadian government bonds rose on a steeper curve, with 10-year bonds rising 3.3 basis points to 0.736%. It had previously hit a three-week low at 0.686%. (Reporting by Fergal Smith; Editing by Andrea Ricci and Peter Cooney)

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