CANADA FX DEBT-C$ fall deepens after central bank statement
* Touches near one-week low at C$1.0350 to the US$
* BoC holds rates steady, revises growth outlooks
* Bond prices flat to lower across curve (Adds details, quotes)
By Jennifer Kwan
TORONTO, Jan 19 (Reuters) - The Canadian dollar fell against the U.S. currency on Tuesday morning after the Bank of Canada held interest rates steady and revised its 2010 economic growth forecast a hair lower.
The central bank kept its overnight lending rate at 0.25 percent and repeated its conditional commitment to hold the rate at that level until the end of the second quarter. It said it now expects 2010 growth of 2.9 percent, down from its previous 3.0 percent forecast, and 2011 growth of 3.5 percent, up from its previous 3.3 percent forecast. [ID:nBAC002362]
The currency fell as low as C$1.0350 to the U.S. dollar, or 96.62 U.S. cents, its lowest level since Jan. 13, from around C$1.0305 just before the announcement.
"I would think it's just some type of positioning," Camilla Sutton, currency strategist Scotia Capital, said of the currency market's reaction to the bank statement. "Those who were hoping that dollar/Canada would be moving lower just clearing out positions... All in all, I think this is a very neutral statement."
All of the 11 primary dealers surveyed last week by Reuters had forecast the central bank would stand pat on rates this week and most expected it to maintain its conditional commitment to keep the key overnight rate at its current level until the end of the second quarter. All see a rate hike at some point this year. [CA/POLL]
Doug Porter, deputy chief economist at BMO Capital Markets, said the market may be interpreting the bank's statement as slightly dovish.
"There might have been some expectation in the market that the bank would be a little bit firmer in when they moved off their conditional commitment," he said. "It seems the currency market is interpreting the press statement as being ever so slightly dovish but the currency was under pressure in any event heading into this for broader reasons."
At 9:38 a.m. (1438 GMT), the Canadian dollar was at C$1.0318, or 96.92 U.S. cents, down from its close of C$1.0265 to the U.S. dollar, or 97.42 U.S. cents, on Monday.
Before the bank's statement, the Canadian currency had sagged as commodity prices lost steam and investors piled back into the greenback after a long weekend in the United States.
Disappointing economic news overseas, including a fourth straight decline in German investor confidence, helped play to the U.S. dollar's strength.
"It's a bit of the old risk-off trade today," Porter said.
"What we've seen pretty much for the past year is when investors are bullish on the global economy and bullish on the outlook, they've been moving out of the U.S. dollar and into other currencies and commodities, and when they're a bit more cautious on the economic outlook broadly they've tended to plow back into the U.S. dollar and out of commodities."
Also on Tuesday, a report showed that Canada's composite leading indicator soared by 1.5 percent in December, the largest month-on-month increase for almost 27 years, pushed up by household spending and a surging stock market. [ID:nOTT003842]
Canadian bond prices were mostly weaker across the curve, mirroring losses in other major markets as prices fell in Europe due to inflation concerns. [US/]
The two-year Canada bond CA2YT=RR slipped 2 Canadian cents to C$99.55 to yield 1.280 percent, while the 30-year bond CA30YT=RR dropped 40 Canadian cents to C$115.45 to yield 4.059 percent. (Additional reporting by Claire Sibonney; editing by Peter Galloway)
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