CANADA FX DEBT-C$ flat ahead of Bank of Canada

Tue Jul 17, 2012 8:24am EDT
 
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* C$ flat vs US$ at C$1.0146
    * Market also eyes U.S. Fed
    * Trades near record against euro
    * Bonds mostly flat

    By Jennifer Kwan
    TORONTO, July 17 (Reuters) - The Canadian dollar traded flat
against its U.S. counterpart on Tuesday as investors awaited
commentary from the Bank of Canada for any hints on the timing
of an interest rate hike.
    Against the greenback, the Canada's currency was
unchanged at C$1.0146, or 98.56 U.S. cents. Analysts unanimously
expect the Bank of Canada to hold its main policy rate at 1
percent, but the real focus will be on whether it will repeat,
dilute or omit the message that it may soon need to raise the
rate. 
    "Our view is that certainly the Bank of Canada is likely to
sound less hawkish than it sounded before, but still be one of
the more hawkish central banks of the advanced economies," said
Camilla Sutton, chief currency strategist at Scotiabank.
    On Monday, the Canadian dollar ended at C$1.0147 against the
U.S. dollar, or 98.55 U.S. cents. 
    The market was also keeping tabs on the U.S. Federal Reserve
with global shares and the euro edging up as investors
speculated that Fed Chairman Ben Bernanke would hint at more
monetary stimulus later in the day.
    Bernanke begins the first leg of a two-day testimony to U.S.
lawmakers later on Tuesday and is expected to be pressed on
whether the central bank is close to launching a third round of
large-scale asset purchases, known as quantitative easing or
'QE3', and what other tools it might consider using.
    The Fed's decision last month to buy an additional $267
billion in long-term bonds with proceeds from short-term debt, a
measure known as Operation Twist, has already put the U.S.
central bank on a policy easing footing. 
    "We have the dual risk today of the Bank of Canada as well
as the Fed," said Sutton. "Those two have really flattened CAD
trading."  
    Against the euro, the Canadian dollar traded near
a record high at around C$1.2458, or 80.27 euro cents.
    Canadian bond prices were mostly flat across the curve on
Tuesday with the 10-year bond yield at 1.630
percent. The two-year government bond yielded around
0.968 percent.