CANADA FX DEBT-C$ weaker ahead of Bank of Canada rate announcement

Wed May 27, 2015 9:40am EDT
 
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* Canadian dollar at C$1.2460, or 80.26 U.S. cents
    * Bond prices mixed across the maturity curve

    TORONTO, May 27 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday with the greenback
continuing to strengthen as the market awaited the Bank of
Canada's latest policy announcement later in the morning.
    At 9:23 a.m. EDT (1323 GMT), the Canadian dollar 
was trading at C$1.2460 to the greenback, or 80.26 U.S. cents,
weaker than Tuesday's official close of C$1.2427, or 80.47 U.S.
cents.
    The currency's strongest level of the session was C$1.2396,
while its weakest was C$1.2484.
    The Bank of Canada will make its announcement at 10 a.m. EDT
(1400 GMT), and the market consensus is that interest rates will
be held steady. 
    The U.S. dollar has gained broadly this week as traders bet
on a pending U.S. rate hike amid a string of upbeat economic
data south of the border.
     "The question is can the Bank of Canada statement do
anything to arrest that," said Jeremy Stretch, head of foreign
exchange strategy at CIBC World Markets in London.
    He said some bets against the loonie could be pulled back if
the bank reiterates Governor Stephen Poloz's outlook for
economic recovery in the second half of the year.  
    But dips will be bought into, Stretch said, because
"underlying metrics still favor the U.S. both in terms of growth
and/or rate spreads."
    Canadian government bond prices were mixed across the
maturity curve, with the two-year down half a
Canadian cent to yield 0.651 percent and the benchmark 10-year
 was up 7 Canadian cents to yield 1.698 percent.
    The Canada-U.S. two-year bond spread was -0.5 basis points,
while the 10-year spread was -45.3 basis points.

 (Reporting by Alastair Sharp; Editing by Peter Galloway)