CANADA FX DEBT-Canada dollar up on Poloz comments, inflation data

Reuters

* Canadian dollar at C$1.1067, or 90.36 U.S. cents * Bond prices lower across the maturity curve By Leah Schnurr and Alastair Sharp TORONTO, Feb 24 (Reuters) - The Canadian dollar strengthened against the greenback on Monday, stabilizing after recent losses and as this week's light economic calendar left the loonie with few near-term catalysts.

Investors were taking in comments from Bank of Canada Governor Stephen Poloz made over the weekend that two months of stronger domestic inflation has made the central bank feel a little more comfortable.

The comments, coupled with inflation data on Friday, pushed investors to trim bets on an interest rate cut.

"The Bank of Canada essentially won't have much fuel to sound any more dovish at their next meeting," Greg Moore, senior currency strategist at Royal Bank of Canada.

But he said with North American monetary policy seemingly on cruise control, it would take a sharp external development to push the loonie much further in either direction.

"Perhaps another month or two of data development will be required before we see any strong trends develop in dollar/Canada again," Moore said.

Data on Friday showed Canada's annual inflation rate jumped to its highest in 1-1/2 years in January. At its most recent meeting last month, the Bank of Canada said it had become more concerned about weak inflation.

The Canadian dollar also benefited from a slight improvement in the appetite for risk in the markets, said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

"With the absence of domestic data until really Friday, we'll be in a bit of a consolidative pattern. I could see the loonie gaining a little bit of strength after that sharp sell-off we saw earlier last week," Smith said.

The Canadian dollar ended at C$1.1067 to the greenback, or 90.36 U.S. cents, stronger than Friday's close of C$1.1133, or 89.82 U.S. cents.

If the currency pair continues to consolidate, the Canadian dollar could firm to as far as about C$1.1020, while any declines should be capped in the low C$1.11 area over the next day or two, Smith said.

The loonie tumbled last week, interrupting February's run higher after the currency hit a 4-1/2-year low at the end of January. The U.S. dollar appreciated by about 1 percent against the loonie last week.

Investors will have to wait until Thursday's current account figures before they get any significant Canadian economic data. But Friday will be the main focus when fourth-quarter gross domestic product will be released. Growth is expected to slip to an annualized 2.5 percent in the fourth quarter.

Canadian government bond prices were lower across the maturity curve, with the two-year down 3 Canadian cents to yield 1.027 percent and the benchmark 10-year down almost 3 Canadian cents to yield 2.522 percent.

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