CANADA FX DEBT-C$ softens; hits multi-year high versus Aussie
* C$ at C$1.0400 vs the US$, or 96.15 U.S. cents * CAD hits strongest level against the AUD in nearly 3 years * Bank of Canada expected to maintain hawkish bias next week * Bond prices mostly higher By Solarina Ho TORONTO, July 12 (Reuters) - The Canadian dollar softened on Friday against its U.S. counterpart but was still on track to post a near 2 percent gain for the week, and the Canadian dollar hit its strongest against the Australian dollar in nearly three years. The Canadian dollar had surged earlier in the week against the greenback after traders scaled back expectations that the Federal Reserve will taper its monteary stiumulus soon. The U.S. dollar on Wednesday and Thursday reeled since Fed chief Ben Bernanke cast doubts on Wednesday over when the central bank will start slowing its asset purchase program. Meanwhile on Friday, the Australian dollar collapsed on expectations of a lower growth rate out of China and rising fears that the Reserve Bank of Australia will cut rates. Camilla Sutton, chief currency strategist at Scotiabank said the Canadian dollar has been left out of the overnight moves, as investors shift focus to the Bank of Canada meeting next week. "The expectation is the Bank of Canada will maintain its slight hawkish bias," said Sutton, who expects the currency to trade between C$1.0326 and C$1.0410 on Friday. A Reuters poll of economists released on Wednesday showed the Bank of Canada is expected to keep its bias toward tightening on July 17, but slow growth and low inflation mean that an actual rate hike will not happen until the fourth quarter of 2014. The spread between Canadian oil exports and imports have also narrowed dramatically as well, Sutton said, which is also a positive for the Canadian dollar. At 10:09 a.m. (1409 GMT), the Canadian dollar was trading at C$1.0400 versus the greenback, or 96.15 U.S. cents, weaker than the Bank of Canada's posted closing rate on Thursday at C$1.0385, or 96.29 U.S. cents. Prices for Canadian government debt were mostly higher across the maturity curve, with the two-year bond rising 1.3 Canadian cents to yield 1.126 percent. The benchmark 10-year bond climbed 25 Canadian cents, yielding 2.415 percent.
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