CANADA FX DEBT-C$ falls after Bank of Canada rate hike

Tue Jun 1, 2010 9:46am EDT
 
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   * C$ drops to 94.93 U.S. cents
 * Bank of Canada first in G7 to hike rates after recession
 * Euro zone fears push bond prices up
 (Updates with Bank of Canada rate decision)
 TORONTO, June 1 (Reuters) - The Canadian dollar fell
against the U.S. dollar on Tuesday morning after the Bank of
Canada became the first Group of Seven central bank to raise
interest rates since the financial crisis began.
 The quarter-percentage point rate hike, which the market
expected, brought the bank's key overnight rate to 0.50
percent, but the bank gave no indication of whether it would
follow up with more rate increases.  [ID:nBCL1HE60I]
 At 9:25 a.m., the currency was at C$1.0534 to the U.S.
dollar, or 94.93 U.S. cents, compared with Monday's close at
C$1.0435 to the U.S. dollar, or 95.83 U.S. cents.
 "They delivered the goods on the current hike but kept
markets guessing on their next moves," said Derek Holt,
economist at Scotia Capital.
 "That lack of clarity on the bias has the (Canadian dollar)
retreating a bit."
 The Canadian dollar CAD=D4 fell as low as C$1.0544 to the
U.S. dollar, or 94.84 U.S. cents, from about C$1.0491 to the
U.S. dollar, or 95.32 U.S. cents, shortly before the rate
announcement.
 The Canadian dollar was already weaker ahead of the rate
decision, weighed by a global rise in risk aversion on concern
about the euro zone's growth outlook.
 Given the risk aversion and uncertainty about the Bank of
Canada's path on interest rates, Canadian bond prices were
higher across the yield curve.
 The two-year Canadian government bond CA2YT=RR jumped 33
Canadian cents to yield 1.692 percent, and the 10-year bond
CA10YT=RR gained 62 Canadian cents to yield 3.281 percent.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)