(New throughout, updates prices, market activity and comments)
* Canadian dollar strengthens 0.3% against the greenback
* Chances of a BoC rate hike next week rise to nearly 70%
* Price of U.S. oil increases 0.6%
* Canadian 10-year yield rises to highest level since Nov.
24
By Fergal Smith
TORONTO, Jan 17 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Monday, as investors raised bets
on the Bank of Canada hiking interest rates as early as next
week after a business survey by the central bank pointed to
rising wage pressures.
Canadian firms see labor shortages intensifying and wage
pressure increasing, with strong demand growth and supply chain
constraints putting upward pressure on prices, a Bank of Canada
survey said.
The central bank here
in December reiterated its guidance that the start of the
tightening cycle could come in April but has since become more
worried about the inflation outlook.
"I think there is too much evidence of building inflationary
pressures for the Bank of Canada to wait another full quarter to
lift rates," said Andrew Kelvin, chief Canada strategist at TD
Securities.
Chances of a rate hike at the Jan. 26 policy announcement
rose to nearly 70% from 60% before the survey, money market data
showed.
The Canadian dollar was trading 0.3% higher at 1.2517
per greenback, or 79.89 U.S. cents, adding to last week's gains.
It traded on Monday in a range of 1.2501 to 1.2557.
Separate data added to recent evidence that the Canadian
economy strengthened in the final quarter of last year.
Canadian factory sales rose 2.6% in November from October
and home sales were up 0.2% in December from November even as
supply fell to a record low level.
The price of oil , one of Canada's major exports, rose
0.6% as investors expected that global supply will remain tight
despite a rise in Libyan output.
Canadian government bond yields were higher across a flatter
curve. The 10-year touched its highest level since
Nov. 24 at 1.819% before dipping to 1.804%, up 3.1 basis points
on the day.
(Reporting by Fergal Smith
Editing by Chizu Nomiyama and David Gregorio)
