CANADA FX DEBT-Canadian dollar holds near 6-year high as U.S. inflation jumps

The Canadian dollar was little changed against its broadly stronger U.S. counterpart on Wednesday, holding near an earlier six-year high as investors bet that the Bank of Canada would be more sensitive to rising
inflation than the Federal Reserve.    
The U.S. dollar rallied against a basket of major currencies as data showed U.S. consumer prices increasing by the most in nearly 12 years in April.             
    
"Higher inflation in the U.S. will spill over into Canada's
economy and place upwards pressure on Canadian CPI," said Simon
Harvey, senior FX market analyst for Monex Europe and Monex
Canada.

The Bank of Canada is likely to be "much more sensitive" to
rising inflation than the Fed. Last August, the Fed shifted to a new monetary policy strategy, putting new weight on bolstering the U.S. labor market and less on worries about too-high inflation.    
         
Canada's central bank signaled last month it could start
raising its benchmark interest rate from a record low of 0.25%
in late 2022 and cut the pace of its bond purchases.
            
BoC Governor Tiff Macklem is due to speak on Thursday on
"the benefits of an inclusive economy." The Canadian dollar was trading nearly unchanged at 1.2100 to the greenback, or 82.64 U.S. cents, having touched its strongest level since May 2015 at 1.2046. It gained ground
against the other G10 currencies.
    
One major cause of inflation has been higher prices for some
of the commodities that Canada produces, including oil.U.S.crude oil futures settled 1.2% higher at $66.08 a barrel on signs of a speedy economic recovery and upbeat forecasts for energy demand.   
          
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year touched its highest since April 29, up as much as 6.6 basis points on the day.

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