CANADA FX DEBT-C$ recovers from 3-week low after Bank of Canada rate decision
* Canadian dollar at C$1.0746 or 93.06 U.S. cents * Bond prices higher across the maturity curve (Adds details on Bank of Canada, quotes, updates prices) By Leah Schnurr TORONTO, July 16 (Reuters) - The Canadian dollar firmed modestly against the greenback on Wednesday after the Bank of Canada stayed neutral on the next move for interest rates in a statement that was not as dovish as some in the market had feared it could be. The central bank shrugged off a recent surge in inflation as temporary and reiterated it could just as easily cut rates as raise them. The Bank of Canada also held rates at 1 percent as had been widely expected. The announcement from the central bank was the key domestic event of the week and had been much anticipated by investors wanting to see how the policymakers would address the surprisingly strong inflation data released last month. While the statement initially sent the loonie to a more than three-week low, the currency managed to reverse course by midday. "On balance, the statement announcement came out pretty much as expected," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. The Bank of Canada shifted policy gears last October when it dropped any mention of tightening on the horizon. Since then, the central bank has said it holds a neutral stance, though some in the market have viewed it as tilting toward dovish. "I think they've dropped that dovish tinge to where we would put them on the spectrum and now are firmly in the neutral category," said Smith. The Canadian dollar was at C$1.0746 to the greenback, or 93.06 U.S. cents, slightly stronger than Tuesday's close of C$1.0758, or 92.95 U.S. cents. The loonie saw little reaction to data earlier on Wednesday that showed the value of Canadian factory sales jumped by 1.6 percent in May, more than economists had expected. Canadian government bond prices were higher across the maturity curve, with the two-year up 2.2 Canadian cents to yield 1.088 percent and the benchmark 10-year up 16 Canadian cents to yield 2.197 percent. (Editing by Meredith Mazzilli)
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