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