CANADA FX DEBT-C$ unchanged as Bank of Canada rate decision in focus
(Adds analyst's comment, closing figures) * Canadian dollar closes at C$1.2740, or 78.49 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, July 14 (Reuters) - The Canadian dollar closed unchanged against the greenback on Tuesday ahead of a much-anticipated Bank of Canada interest rate decision on Wednesday. The currency had swung widely early in the session, in part due to unexpectedly weak U.S. retail sales data for June, before settling down. Markets are pricing in about a 47 percent chance the central bank will announce a 25-basis-point rate cut for the second time this year. The first cut was in January and the bank's benchmark rate is now 0.75 percent. "The Bank of Canada holds all the cards for tomorrow for the fate of the loonie," said Rahim Madhavji, president of KnightsbridgeFX.com. "I think we're going to see a big move tomorrow regardless of how it comes out." The Canadian dollar finished the day at C$1.2740 to the greenback, or 78.49 U.S. cents, exactly where it closed on Monday. It briefly touched C$1.2716 immediately after the U.S. data, its strongest level of the session, before sliding back. It had weakened to C$1.2805 overnight. U.S. retail sales fell 0.3 percent to the weakest level since February, while May figures were revised lower, raising some concern that the U.S. economy was slowing again. Economists polled by Reuters had predicted a rise of 0.2 percent. Meanwhile, U.S. import prices also slid unexpectedly last month, as the lingering effects of a strong U.S. dollar offset rising costs for petroleum products. Market participants will also be watching the Bank of Canada's rate decision, due at 10:00 a.m. EDT (1400 GMT), to see what kind of tone the central bank will adopt in its policy statement. "There's a little bit of humble pie that the Bank of Canada will have to eat because it was only a couple of months ago that they were saying the economy was okay and things are going to bounce back," Madhavji said. "But all of a sudden, people are talking about another rate cut. It just goes to show how unreliable their forecast can be. It's not really their fault ... But they're kind of caught in a hard place." Canadian government bond prices were higher across the maturity curve, with the two-year price up 3.5 Canadian cents to yield 0.458 percent and the benchmark 10-year rising 37 Canadian cents to yield 1.648 percent. The Canada-U.S. two-year bond spread was -18.3 basis points, while the 10-year spread was -74.9 basis points. (Reporting by Solarina Ho; Editing by Nick Zieminski; and Peter Galloway)
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