CANADA FX DEBT-C$ hits 2-1/2 month high as BoC talks rate hikes

Wed Jul 20, 2011 5:24pm EDT
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* C$ at C$0.9474 to the U.S. dollar, or $1.0555

* Touches highest level since May 2

* Bank of Canada talks about tightening plans

* Improved global risk sentiment supports.

By Trish Nixon

TORONTO, July 20 (Reuters) - Canada's dollar strengthened to a 2-1/2 month high against the greenback on Wednesday, after the Bank of Canada discussed the prospect of higher rates and investors became more hopeful about European and U.S. debt woes.

A day after raising expectations it would increase interest rates soon, the Bank of Canada said it might keep rates below their normal long-run levels even after the Canadian economy is back to full capacity. [ID:nN1E76J0N0]

The currency built on gains of nearly a penny seen on Tuesday, when the surprisingly hawkish language in its rate decision statement spurred buying.

"You can argue that part of that was a residual effect from yesterday and the rates statement," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.   Continued...