CANADA FX DEBT-C$ hits three-year high ahead of BoC, weak USD

Tue Mar 1, 2011 8:48am EST
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   * C$ at C$0.9706, or $1.0303
 * Hits three-year high at C$0.9684
 * Bond prices lower across the curve
 By Solarina Ho
 TORONTO, March 1 (Reuters) - The Canadian dollar rose to a
three-year high against its U.S. counterpart, ahead the Bank of
Canada's interest rate decision on Tuesday and also as the
greenback came under pressure.
 The Canadian central bank is widely expected to hold its
key interest rate at 1.0 percent when it announces its decision
at 9 a.m. (1400 GMT). However, according to a poll of 24
participants, more than 60 percent believe rates will rise in
the first half of this year with the median forecast pointing
to a quarter-point rise on May 31 to 1.25 percent. [CA/POLL]
 On Monday, Statistics Canada reported that fourth-quarter
GDP data exceeded forecasts, boosted by a jump in exports and
strong consumer spending. The 3.3 percent annualized GDP growth
during the quarter bolstered the view the central bank will
resume hiking interest rates in the first half of the year.
 "Canada's doing well, oil prices and yesterday's GDP
figure's making people think the Bank is going to go sooner
rather than later," said John Curran, senior vice president at
CanadianForex, but noted that the continued strength of the
currency would be a concern.
 "It gives them leeway to keep rates pretty much on hold if
we get this continued strength."
 The currency hit its highest level since November 2007 as
its U.S. counterpart came under broad selling pressure on
expectations that interest rates would rise more quickly in
other parts of the world, and there also was caution ahead of
closely watched testimony from U.S. Federal Reserve Chairman
Ben Bernanke. [FRX]
 At 8:31 (1331 GMT), the Canadian dollar CAD=D4 stood at
C$0.9706 to the U.S. dollar, or $1.0303, up from Monday's North
American finish of C$0.9714, or $1.0294.
 The currency rose as high as C$0.9684 to the U.S. dollar,
or $1.0326, its highest level since November 2007.
 "Realistically, below this 97-cent level, there are few
technical spots. This is sort of reminiscent of last time we
were down here with oil skyrocketing and the Canadian dollar
following along," said Curran.
 "I don't think it'll be sustainable over the long period."
 Canadian bond prices were lower across the curve. [US/]
 The interest rate-sensitive two-year bond CA2YT=RR was
down 3.5 Canadian cents to yield 1.86 percent, while the
10-year bond CA10YT=RR was off 11 Canadian cents to yield
3.315 percent.
 (Editing by Chizu Nomiyama)