CANADA FX DEBT-C$ pinched by strong greenback, Bank of Canada in focus
(Adds central bank details, closing figures, market commentary) * Canadian dollar at C$1.2740 or 78.39 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, July 13 (Reuters) - The Canadian dollar retreated against a stronger U.S. dollar on Monday, as market attention shifted toward the Bank of Canada and the U.S. Federal Reserve after a debt deal was finally reached between Greece and its international creditors. The Canadian dollar's moves are now expected to remain limited ahead of a closely watched Bank of Canada interest rate decision due Wednesday. "The prospect of Bank of Canada (cutting rates) is weighing a little bit on the currency. That explains some of the early weakness today," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. Markets had priced in about a 50 percent chance of a 25 basis point rate cut following a string of disappointing Canadian economic data that indicated economic growth in the second quarter would be stagnant after a contraction in the first quarter. But Friday's stronger-than-expected employment report for June tempered some of those expectations, with markets dropping the odds of a rate cut to about 39 percent. The Canadian dollar, which was a mid-performer against other key currencies, finished at C$1.2740 to the greenback, or 78.49 U.S. cents, softer than the Bank of Canada's official close of C$1.2679, or 78.87 U.S. cents, on Friday. During the session, the loonie traded between C$1.2668 and C$1.2790. "There's still that idea of Canada being dovish, relative to the U.S.," said Chandler, who expressed some caution about the falling market odds. The U.S. dollar, meanwhile, rose against a basket of key currencies on Monday following the Greek debt deal, which renewed focus on the prospects the Fed might hike interest rates in September, a move that would stand in sharp contrast to Canada. Comments from central bank Chair Janet Yellen and Boston Fed President Eric Rosengren on Friday suggested a September move could be likely. Canadian government bond prices were mostly higher across the maturity curve, with the two-year price up 5 Canadian cent to yield 0.473 percent and the benchmark 10-year climbing 1 Canadian cent to yield 1.684 percent. The Canada-U.S. two-year bond spread was -20.4 basis points, while the 10-year spread was -76.3 basis points. (Reporting by Solarina Ho; Editing by Peter Galloway and Cynthia Osterman)
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