CANADA FX DEBT-C$ softer after factory data, eye on Bank of Canada
* C$ at C$1.0425 vs US$, or 95.92 U.S. cents * Manufacturing data shows moderate growth * Bank of Canada rate decision, outlook in focus By Alastair Sharp TORONTO, July 16 (Reuters) - The Canadian dollar was weaker against the U.S. dollar in early trade on Tuesday after domestic manufacturing data showed modest gains, with traders largely focused on Wednesday's highly anticipated Bank of Canada policy decision. Canadian factory sales in May rose 0.7 percent from April, making up some of the ground lost during a plunge that month. The "numbers were close enough to consensus; it didn't give a strong signal in either direction," said Greg Moore, a currency strategist at TD Securities. Instead, investors are mostly looking to the first interest rate decision by new Bank of Canada Governor Stephen Poloz on Wednesday, which coincides with a quarterly Monetary Policy Report outlining the central bank's view of the economy. Economists polled by Reuters expect the central bank to leave its benchmark rate unchanged at 1 percent and repeat its warning that the next move in rates will be an increase. But with slow growth and low inflation, a rate increase is not expected until the fourth quarter of 2014. Moore said there is a risk that the central bank will send a more neutral message, which could prompt further Canadian dollar weakness. The Canadian dollar has slipped in recent sessions, partly on concern about how much the central bank might cut growth forecasts and the risk Poloz could send dovish signals. The currency traded as low as C$1.0442 to the U.S. dollar, or 95.77 U.S. cents, its weakest level since July 11. At 9:12 a.m. (1312 GMT) the Canadian dollar was trading at C$1.0425 to the greenback, or 95.92 U.S. cents, compared with C$1.0415, or 96.02 U.S. cents, at Monday's North American close. The loonie, as Canada's currency is colloquially known, fell sharply against its commodity-linked cousin, the Australian dollar, after minutes from that country's last central bank meeting provided a less-dovish message than investors were expecting. The price of Canadian government debt was higher across the curve, with the two-year bond up 2 Canadian cents to yield 1.122 percent, while the benchmark 10-year bond rose 3 Canadian cents to yield 2.412 percent.
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