CANADA FX DEBT-C$ dips, bonds fall; focus on Bank of Canada
* C$ falls, but books third consecutive weekly gain
* Bond prices driven lower by supply fears, rising stocks
* Annual inflation eases in March, core higher
* Focus on next week's Bank of Canada rate decision, MPR (Adds details and comments)
By Ka Yan Ng
TORONTO, April 17 (Reuters) - The Canadian dollar fell against the U.S. dollar on Friday as market players prepared for next week's Bank of Canada interest rate decision and the bank's outline of alternative steps it could take to stimulate the slumping economy.
The Canadian currency finished at C$1.2150 to the U.S. dollar, or 82.30 U.S. cents, down from C$1.2096 to the U.S. dollar, or 82.67 U.S. cents, at Thursday's close. Despite the pullback, the currency finished 0.8 percent higher on the week, its third straight week of gains.
"There are some event risks, uncertainties that exist around quantitative easing measures potentially being put forth by the Bank of Canada next week," said Jack Spitz, managing director of foreign exchange, at National Bank Financial.
"Some of the long Canada positions that have been built up over the course of the past week are being squared up ahead of the events."
Canadian inflation data released on Friday did little to change expectations that the Bank of Canada could soon take additional measures beyond interest rate cuts to lift Canada's sagging economy.
The data showed Canada's annual inflation rate slowed to 1.2 percent in March from 1.4 percent in February, but the core rate closely watched by the central bank unexpectedly rose to 2 percent. [ID:nN17500487]
The Bank of Canada will announce its interest rate decision on April 21. Most primary dealers expect it to hold its key rate steady at 0.50 percent and will watch for hints on whether the central bank plans to introduce quantitative or credit easing measures. [ID:nTOR004440]
The central bank's Monetary Policy Report, due April 23, is expected to lay out a framework for nonstandard policy measures to stimulate the economy.
BOND PRICES SLUMP
Canadian bond prices were hit by a combination of rising North American stock markets and concern about new U.S. supply.
"You're getting more people willing to switch into risk," said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment.
Equity markets booked their sixth straight week of gains, rising in response to improved sentiment about global prospects for an economic recovery.
Also, Canadian bond prices tracked U.S. Treasuries, which were under pressure from worries about a surge of U.S. supply hitting the market at the end of the month.
Next week's Bank of Canada events were also high on the radar of fixed income market participants. Dong said it was difficult to predict how the market will react to a framework on unconventional policy measures by the Bank of Canada until specifics are laid out.
"The devil is in the details," he said.
The two-year bond fell 9 Canadian cents to C$100.18 to yield 1.163 percent, while the 10-year bond declined 57 Canadian cents to C$106.30 to yield 3.021 percent.
The 30-year bond shed C$1.00 to C$121.55 to yield 3.753 percent. In the United States, the 30-year Treasury yielded 3.796 percent.
Canadian bonds outperformed their U.S. counterparts across the curve, with the 30-year bond 4.3 basis points below its U.S. counterpart, compared to 2 basis points on Thursday. (Reporting by Ka Yan Ng; editing by Peter Galloway)
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