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CANADA FX DEBT-C$ firms as stocks rally; BoC rate decision awaited

0.2% in the second quarter.

* Canadian dollar rises 0.1% against the greenback

* Canada posts a C$1.12 billion trade deficit in July

* Price of U.S. oil increases 2.2%

* Canadian bond prices fall across the yield curve

TORONTO, Sept 4 (Reuters) - The Canadian dollar rose against the greenback on Wednesday as investor risk appetite improved, but the currency's gains were modest ahead of a Bank of Canada interest rate decision and after domestic data showed a wider-than-expected trade deficit.

At 8:40 a.m. (1240 GMT), the Canadian dollar was

trading 0.1% higher at 1.3323 to the greenback, or 75.06 U.S. cents. The currency, which hit on Tuesday its weakest intraday level in two-and-a-half months at 1.3382, traded in a range of 1.3314 to 1.3343. Canada posted a trade deficit of C$1.12 billion in July as imports rose and exports declined, Statistics Canada said. Analysts had forecast a deficit of C$0.40 billion. Separate data showed that Canadian labor productivity grew Meanwhile, money markets expect the Bank of Canada to leave its benchmark interest rate on hold at 1.75%, when it announces its decision at 10 a.m. (1400 GMT), but to ease by the end of the year. The central bank has worried about the risks trade wars pose to the global economy.

Stocks rose globally on Wednesday after encouraging

data from China reduced concerns of slowing global growth and as UK lawmakers sought to prevent a no-deal Brexit.

Canada exports many commodities, including oil, so its economy could benefit from an improved outlook for the global economy.

U.S. crude oil futures prices were up 2.2% at $55.11

a barrel. Canadian government bond prices were lower across the yield

curve, with the two-year down 1.5 Canadian cents toyield 1.324% and the 10-year falling 26 Canadian

cents to yield 1.141%.

(Reporting by Fergal Smith; Editing by Steve Orlofsky)