CANADA FX DEBT-Loonie dented by Yellen; Bank of Canada in focus

Tue Jul 15, 2014 4:36pm EDT
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* Canadian dollar at C$1.0758 or 92.95 U.S. cents
    * Bond prices mixed across maturity curve

 (Adds details, quotes, updates market prices)
    By Leah Schnurr
    TORONTO, July 15 (Reuters) - The Canadian dollar weakened on
Tuesday against the greenback, which got a lift from Federal
Reserve comments signaling its policy will stay loose, while
traders were cautious the day before a policy statement from
Canada's own central bank.
    Federal Reserve Chair Janet Yellen said U.S. labor markets
are far from healthy and suggested the Fed will keep monetary
policy accommodative until hiring and wage data show the effects
of the financial crisis are "completely gone". 
    The comments sent the U.S. dollar up broadly to the
detriment of the loonie. The greenback was up 0.3 percent
against a basket of currencies.
    The Bank of Canada statement on Wednesday will be the
biggest event of the week for Canada. While the central bank is
widely expected to hold rates at 1 percent, investors will be
watching to see if it reacts to recent stronger-than-expected
    "Most people are expecting a cautious tone, some sort of
discussion on export growth needing to pick up, inflation being
strong but not too strong," said Rahim Madhavji, president at in Toronto.
    "Many people are expecting a loonie-negative tone from the
Bank of Canada."
    The Canadian dollar ended the North American
session at C$1.0758 to the greenback, or 92.95 U.S. cents,
weaker than Monday's close of C$1.0715, or 93.33 U.S. cents.
     The loonie gained 1.6 percent through June in a rally
fueled by the stronger-than-expected inflation data, higher oil
prices and short-covering. But the currency's momentum stalled
last week as it was hit hard by a report that showed the economy
lost jobs in June.
    Investors will be watching to see if the Bank of Canada and
Governor Stephen Poloz address the Canadian dollar's recent
    "We're going to get a good sense tomorrow as to how Poloz
feels about the strength of the Canadian dollar since the last
meeting," Madhavji said.
    "The more conservative way is to just talk about exports and
that inadvertently discusses the loonie. The more direct way,
which I don't think he'll do, is to talk about the Canadian
dollar itself."
    Canadian government bond prices were mixed across the
maturity curve, with the two-year unchanged to yield
1.099 percent. The benchmark 10-year was also flat
to yield 2.216 percent.

 (Editing by Peter Galloway)