CANADA FX DEBT-C$ up, bonds down, as BoC tweaks stance

Tue Mar 2, 2010 12:34pm EST
 
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* C$ advances to 96.81 U.S. cents, hits 6-week high

* Bonds hold lower

* Bank of Canada holds rates, sees no early hike (Adds details)

By Ka Yan Ng

TORONTO, March 2 (Reuters) - Canada's currency hit a six-week high against the U.S. dollar on Tuesday, while bonds held lower, after the Bank of Canada left interest rates unchanged, as expected.

The Canadian dollar rose as high as C$1.0309 to the U.S. dollar, or 97 U.S. cents, soon after the central bank rate decision as market players detected a tone shift in the bank's statement.

The central bank acknowledged stronger-than-expected economic growth and inflation, and it also removed a reference to downside risks to its inflation outlook that had been present in previous statements, all of which hinted at a slightly more hawkish bent. [ID:nN02149877]

"It's a subtle but important change," said Matthew Strauss, senior currency strategist at RBC Capital Markets. "By now saying (risks to inflation outlook is) roughly balanced, the underlying dovish tone has disappeared and made way for a neutral statement."

"More importantly, the overall backdrop remains quite positive with the risk appetite continuing globally. Equities, commodities are looking pretty decent today," Strauss said.   Continued...