CANADA FX DEBT-C$ holds above C$1.20 ahead of Bank of Canada report
* Canadian dollar at C$C$1.2070 or 82.85 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, Jan 21 (Reuters) - The Canadian dollar was stronger against its U.S. counterpart on Wednesday, helped by firmer crude oil prices, but the currency remained above the key psychological C$1.20 level as investors awaited the Bank of Canada's Monetary Policy Report. The central bank is widely expected to keep interest rates unchanged at 1 percent, but market participants are keen to see what it will say about the impact of cheap crude, and how much lower it will revise its forecasts on growth and inflation. The market has also begun pricing in a higher risk of an rate cut, though most strategists still believe a hike is eventually in order, even as some predictions have begun pushing the next move further back. "Markets are just nervously consolidating ahead of the Bank of Canada. Most people are expecting a dovish turn, but nothing as extreme as an outright easing bias," said Greg Anderson, global head of foreign exchange strategy with BMO Capital Markets in New York. At 8:58 a.m. (1358 GMT), the Canadian dollar was at C$1.2070 to the greenback, or 82.85 U.S. cents, stronger than Tuesday's close of C$1.2107, or 82.60 U.S. cents, but still trading near levels not seen in more than 5-1/2 years. A bond-buying stimulus program by the European Central Bank expected on Thursday helped push crude prices higher, which provided some support for the commodity-sensitive Canadian dollar. Canada is a major exporter of crude. The currency's moves have been closely tied to the price of oil, which has plunged more than 50 percent since June. Canadian government bond prices were higher across the maturity curve, with the two-year up 1.5 Canadian cents to yield 0.841 percent and the benchmark 10-year up 2 Canadian cents to yield 1.486 percent. (Editing by Jeffrey Benkoe)
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