* C$ jumps to 96.57 U.S. cents, hits six-week high
* Bonds hold lower
* Bank of Canada rate announcement at 9 a.m.
By Ka Yan Ng
TORONTO, March 2 (Reuters) - Canada’s currency surged to a six-week high against the U.S. dollar on Tuesday, extending gains from Monday’s firm economic growth figures, and ahead of a key Bank of Canada rate announcement.
Government bonds held lower as market players priced in sooner-than-expected rate hikes.
The Bank of Canada’s policy announcement, due at 9 a.m. (1400 GMT), is widely expected to result in no change in rates but market players are watching for a change in tone, particularly after Canada’s fourth-quarter economic growth handily beat market, and even the central bank‘s, estimates. [ID:nN25256606] [ID:nN25112645] CABOCR=ECI
That had fueled talk that the Bank of Canada could raise interest rates sooner than it had planned. The central bank has conditionally pledged to keep rates low until the end of June.
“The Canadian dollar is riding a wave of strength from yesterday’s GDP and market expectations that (Bank of Canada Governor Mark) Carney may announce some sort of shift in their commitment to keep rates on hold,” said John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.
“It’s getting a little overdone...but at the end of the day, we’re still trading between our five-month band between C$1.02 and C$1.08.”
At 8:25 a.m. (1325 GMT), the Canadian dollar was at C$1.0355 to the U.S. dollar, or 96.57 U.S. cents, up from C$1.0416 to the U.S. dollar, or 96.06 U.S. cents, at Monday’s close. It had stretched gains as far as C$1.0341 earlier.
If the Bank of Canada does little to change its tone or language in its statement on Tuesday, the currency may lose some of its gains.
The two-year Canadian government bond CA2YT=RR shed 7 Canadian cents to C$100.23 to yield 1.385 percent, while the 10-year bond CA10YT=RR fell 13 Canadian cents to C$102.60 to yield 3.419 percent. (Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)