CANADA FX DEBT-C$ edges higher, BoC caution checks gains

Wed Apr 13, 2011 5:28pm EDT
 
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   * C$ ends at C$0.9624 to US$, or $1.0391
 * Bond prices higher across the curve
 * Bank of Canada reiterates warning on C$ strength
 (Updates details and adds comment)
 TORONTO, April 13 (Reuters) - The Canadian dollar finished
marginally higher against the greenback on Wednesday, as
warnings from the Bank of Canada that the currency's strength
could dampen economic growth kept it off recent highs and in a
tight range for much of the session.
 Central Bank Governor Mark Carney flagged the Canadian
dollar's sharp appreciation as an "additional risk" to the
outlook for growth and inflation at a news conference on
Wednesday, following release of the central bank's quarterly
Monetary Policy Report (MPR). [ID:nN13259704]
 His remarks reinforced comments by the central bank on
Tuesday about the currency's "persistent strength", after it
left interest rates steady at 1 percent. [ID:nN12172793]
 The strong Canadian dollar is seen as a drag on economic
growth as it makes exports more costly, notably with Canada's
main trading partner, the United States.
 The currency CAD=D4 finished at C$0.9624 to the U.S.
dollar, or $1.0391, up modestly from Tuesday's North American
finish of C$0.9631 to the U.S. dollar, or $1.0383. That was
still well off 3-1/2 year highs hit last week when traders
positioned themselves ahead of the bank report.
 The detailed forecasts revealed in the bank's quarterly
Monetary Policy Report on Wednesday supported the view the
central bank is not about to lift interest rates next month.
BOCWATCH
 "To me it looks likes they're going to give some guidance
to the market in May to move rates in July, so it's more for me
a confirmation that the normalization of the interest rate
cycle in Canada is closer to what we would have expected in
their January MPR," said Yanick Desnoyers, an economist at
National Bank Financial.
 "They said explicitly they saw global risk decreasing
compared to January and they revised up Canadian growth, so to
me there's nothing negative in there."
 A Reuters poll of economists and strategists released last
week forecast the bank making its first interest rate hike of
the year on July 19. [CA/POLL]
 Against the Bank of Canada backdrop, a rebound by equities
markets and oil prices also helped support the Canadian
dollar.
 "You're seeing a certain consolidation in the currency
after yesterday's selloff," said David Tulk, chief Canada macro
strategist at TD Securities.
 Government bonds were higher and resumed their upward climb
on the reduced prospect of a near-term rate increase.
 The two-year bond CA2YT=RR, which is especially sensitive
to Bank of Canada policy moves, was was up 6 Canadian cents to
yield 1.825 percent, while the 10-year bond CA10YT=RR gained
36 Canadian cents to yield 3.372 percent.
 (Reporting by Solarina Ho and Ka Yan Ng; editing by Rob
Wilson)