WRAPUP 1-C$ posts biggest gain in 10 months as Bank of Canada cuts stimulus

    * Loonie touches its strongest since March 18 at 1.2455
    * Canada's main stock index rises 0.5%
    * BoC cuts pace of bond purchases to C$3 billion per week
    * Canada's annual inflation rate accelerates to 2.2% in

    By Fergal Smith
    TORONTO, April 21 (Reuters) - The Canadian dollar surged by
the most since June 2020 against its U.S. counterpart on
Wednesday and the Toronto stock market rebounded as investors
welcomed a move by the Bank of Canada to dial back emergency
support for the economy.
    The loonie        strengthened 0.9% to 1.2495 per U.S.
dollar, or 80.03 U.S. cents. Canada's main stock index          
ended 0.5% higher at 19,143.25, clawing back some of its decline
over the previous two days.
    "I think we are seeing positive sentiment toward the
Canadian economy coming off the comments from the Bank of Canada
today," said Colin Cieszynski, chief market strategist at SIA
Wealth Management.
    The Bank of Canada signaled that it could start hiking
interest rates in late 2022, as it sharply boosted its outlook
for the Canadian economy and cut the pace of bond purchases to
C$3 billion per week from C$4 billion.             
    The central bank began a large-scale bond buying program
last year to support the economy during the coronavirus crisis.
    The reduction in stimulus puts Canada's central bank at odds
with some other major central banks, such as the Federal Reserve
and the European Central Bank, that have said they will maintain
or even increase the pace of bond buying.
    "It makes sense that Canada might be one of the ones to
start scaling back first ... our economic numbers have been
quite positive," Cieszynski said.
    Canada's annual inflation rate doubled to 2.2% in March,
Statistics Canada said, while the average of the Bank of
Canada's three core measures was 1.9%, up from 1.8%.
    The Canadian dollar, which touched its strongest intraday
level since March 18 at 1.2455, was able to rally despite
pressure on the price of oil, one of Canada's major exports.
    U.S. crude oil futures        settled 2.1% lower at $61.35 a
barrel amid concerns that surging COVID-19 cases in India will
drive down fuel demand in the world's third-biggest oil
    Still, the Toronto Stock Exchange's energy sector          
advanced 0.9%, while the materials group            was up 1.1%,
bolstered by higher gold prices       . Last Friday, the TSX
notched a record high at 19,380.68.
    Canadian government bond yields were higher across the
curve. The 2-year rose 2.2 basis points to 0.317%, near the top
if its range since the start of the year.

 (Reporting by Fergal Smith; Editing by Kirsten Donovan and
David Gregorio)