REFILE-CANADA FX DEBT-C$ at 2-month low, hits US$ parity, on dovish BoC

Wed Jan 23, 2013 3:34pm EST
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* C$ weakens to C$1.0005 to the greenback, or $0.9995

* C$ at softest since Nov. 19

* Bank of Canada slashes growth forecast, rate hikes "less imminent"

By Alastair Sharp

TORONTO, Jan 23 (Reuters) - The Canadian dollar tumbled to trade for less than equal value with the U.S. dollar on Wednesday after the Bank of Canada held interest rates steady and said a future rate hike was "less imminent" as it reduced its growth forecasts.

The plunge to a two-month low came after the central bank dramatically revised its growth assumptions and said the Canadian economy likely grew by 1 percent annualized in the fourth quarter, after initially predicting 2.5 percent growth.

"Given the tone ... it's not surprising that the Canadian dollar would weaken on the statement because the market probably will push forward its outlook for interest rates, possibly into 2014," said Sal Guatieri, a senior economist at BMO Capital Markets.

Overnight index swaps, which trade based on expectations for the central bank's key policy rate, showed that after the announcement traders reduced their bets on a rate hike in late 2013.   Continued...