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CANADA FX DEBT-C$ gains as BoC survey bolsters bets for supersized rate hike

·2 min read

(Adds economist quote and details throughout; updates prices) * Canadian dollar strengthens 0.2% against greenback * Loonie trades in a range of 1.2838 to 1.2902 * Price of U.S. oil rises 2.1% * Canadian 10-year yield touches four-week low By Fergal Smith TORONTO, July 4 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday, as oil prices rose and a Bank of Canada survey showed a surge in inflation expectations that bolstered bets for a supersized interest rate increase next week by the central bank. Consumer inflation expectations hit fresh highs in the short-term and were up "significantly" over the long-term, a BoC survey showed. "The persistence of rising inflation expectations only reinforces our expectations for a 75 bp (basis point) hike at next week's policy meeting," Shelly Kaushik, an economist at BMO Capital Markets, said in a note. Money markets expect the BoC to raise its benchmark rate by three-quarters of a percentage point at its next policy decision on July 13, which would be its biggest hike in 24 years. Separate data showed that Canadian manufacturing activity lost some momentum in June as inflation pressures and material shortages held back production and firms became less optimistic about future output. The S&P Global Canada Manufacturing Purchasing Managers' Index fell to a seasonally adjusted 54.6, its lowest level since January 2021, from 56.8 in May. The price of oil, one of Canada's major exports, rose as concerns of tight supply offset global recession fears. U.S. crude was up 2.1% at $110.66 a barrel, while world stocks advanced in trade thinned by the Fourth of July holiday in the United States. The Canadian dollar was trading 0.2% higher at 1.2853 to the greenback, or 77.80 U.S. cents, after moving in a range of 1.2838 to 1.2902. Speculators have raised their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. Canadian bond yields were lower across a flatter curve on Monday. The 10-year touched its lowest since June 7 at 3.162% before recovering slightly to 3.177%, down 4.8 basis points on the day. (Reporting by Fergal Smith Editing by Chizu Nomiyama and Paul Simao)