CANADA FX DEBT-C$ posts biggest weekly gain this year on robust domestic economy

(Adds analyst quotes and details throughout; updates pricing) * Loonie hits highest level since March 3 at 1.2595 * Canadian retail sales rise 3.2% in January * U.S. oil price settles 1.7% higher * Canadian 10-year yield hits 2.196% By Fergal Smith TORONTO, March 18 (Reuters) – The Canadian dollar strengthened for a fourth day against the greenback on Friday, with stronger-than-expected domestic retail sales data supporting the view that the Bank of Canada will keep pace with rate hikes expected this year by the Federal Reserve. The loonie was trading up 0.2% at 1.2595 against the greenback, or 79.40 US cents, its highest level since March 3. It added to the gains of the previous three days. For the week, it rose 1.2%, its biggest weekly gain since December. Retail sales in Canada rose 3.2% in January, beating estimates of a 2.4% increase, as shoppers ventured to car dealerships and home improvement stores, although a preliminary estimate showed a 0.5% drop in sales in February. “Things are falling into place for the Canadian economy,” said Ronald Simpson, managing director, global currency analysis at Action Economics. The Bank of Canada “is going to be just as aggressive” in raising interest rates as the Fed, Simpson added. The U.S. central bank on Wednesday raised interest rates for the first time since 2018. The move came two weeks after the Bank of Canada began its own tightening cycle. Money markets expect Fed and BoC benchmark rates to end the year at around 2% as central banks are likely to repeatedly hike to fight inflation. The U.S. dollar index rebounded from recent declines against a basket of major currencies, while the price of oil, one of Canada’s top exports, rose 1.7% to 104.70 $ per barrel. This follows a volatile trading week for crude with no easy replacement for Russian barrels in a tight market. The Canadian 10-year rate rose nearly a basis point to 2.196%, after hitting its highest level since December 2018 at 2.273% on Wednesday. (Reporting by Fergal Smith; editing by Tim Ahmann and Nick Zieminski)

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