CANADA FX DEBT-C$ at 1-1/2-month low as investors mull policy shift
* C$ at C$1.0455 vs US$, or 95.65 U.S. cents * Loonie down for third session following central bank shift * Canadian bond prices higher across the curve By Leah Schnurr TORONTO, Oct 25 (Reuters) - The Canadian dollar languished at a 1-1/2-month low on Friday after this week's policy shift by the country's central bank led investors to believe interest rates will stay at current low levels for longer than had been anticipated. Highlighting weaker-than-expected growth and inflation, the Bank of Canada on Wednesday dropped any mention of eventual rate increases from its latest policy statement after more than a year of warning that rates will one day have to rise. The central bank has kept its key rate at 1 percent since 2010, and analysts said the removal of its rate-rise bias gives its policy stance a more neutral tone. "It signaled a fairly significant move and has been a bit of a game-changer for the Canadian dollar," said Jack Spitz, managing director of foreign exchange at National Bank Financial in Toronto. Analysts had until recently largely expected the bank to resume raising rates at the end of next year. A Reuters poll showed Canada's primary dealers now expect the Bank of Canada to keep its key rate at 1 percent well into 2015. The Canadian dollar ended the North American session at C$1.0455 versus the greenback, or 95.65 U.S. cents, weaker than Thursday's close of C$1.0425, or 95.92 U.S. cents. During the session it fell as low as C$1.0461, its lowest level since early September. The loonie lost 1.6 percent this week, its worst week since mid-June, according to Reuters data. "The viewpoint by and large on the Street now is that the Canadian dollar is poised for additional weakness, and I think a move through C$1.05 will likely attract more momentum," Spitz said. Canadian gross domestic product for August is on investors' radar for next week, as is a two-day meeting of the U.S. Federal Reserve's policy-setting committee. The Fed surprised markets in September with its decision to continue its stimulative bond-buying program at a $85 billion a month pace, rather than trimming the amount. The loonie touched a three-month high following the September Fed announcement but it has weakened since. Analysts see the Canadian dollar benefiting from any delay in the Fed's withdrawal from quantitative easing as the currency should attract some risk appetite. Canadian government bond prices were higher across the maturity curve. The two-year bond was up 3 Canadian cents to yield 1.083 percent, and the benchmark 10-year bond added 8 Canadian cents to yield 2.416 percent.
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