CANADA FX DEBT-C$ slightly weaker ahead of inflation data
* Canadian dollar at C$1.0758 or 92.95 U.S. cents * Bond prices higher across maturity curve (Adds details, quotes, updates prices) By Leah Schnurr TORONTO, July 17 (Reuters) - The Canadian dollar was marginally weaker against the greenback on Thursday as news that a Malaysian airliner was brought down over eastern Ukraine rattled markets, and as investors consolidated positions a day ahead of the release of domestic inflation data. Raising the stakes in a conflict between Kiev and pro-Moscow rebels, Ukraine accused militants of shooting down the Malaysia Airlines flight, killing all 295 people aboard. The loonie had already been trading in a tight range when the news broke. The downing of the aircraft did not encourage risk-taking and left investors cautious. "The foreign exchange market reaction has been fairly muted. Ordinarily, in this sort of situation you can get in an environment where you buy the rumor, sell the fact," said Gareth Sylvester, director at Klarity FX in San Francisco. "Perhaps traders may be taking a step back and saying, 'Lets not be too hasty, lets just see how things develop over the next few hours, the next day or two, and then we'll make a decision on how we should be positioned.'" The Canadian dollar ended the North American session at C$1.0758 to the greenback, or 92.95 U.S. cents, slightly weaker than Thursday's close of C$1.0746, or 93.06 U.S. cents. The loonie was also consolidating following an expected message from the Bank of Canada on Wednesday. The central bank shrugged off a recent rise in inflation as temporary and warned that the economy does not yet have enough steam to grow without help. The bank also stuck to its neutral policy stance, saying interest rate cuts are just as possible as rate hikes. Analysts said the bank's statement and subsequent remarks at a news conference were largely in line with what the market had expected, and that the focus was turning to Friday's consumer price index report for June. Annualized inflation is forecast to hold at 2.3 percent for the month and core inflation to be at 1.7 percent. The loonie rallied through much of June, partly due to the recent surge in inflation as investors speculated about how the central bank would address the rise after warning repeatedly about a low inflation environment. TD Securities forecasts a small decline in overall inflation for June, but an upside surprise "might trigger some in the market to start wondering again whether the bank is a bit behind," which could be a headwind for the currency pairing, said Martin Schwerdtfeger, FX strategist at TD Securities in Toronto. Canadian government bond prices were higher across the maturity curve, with the two-year up 4 Canadian cents to yield 1.070 percent and the benchmark 10-year up 50 Canadian cents to yield 2.144 percent. (Additional reporting by John Tilak; Editing by Jonathan Oatis)
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