CANADA FX DEBT-C$ rises as US$ slides; BoC releases outlook
* C$ higher at C$1.0250, or 97.56 U.S. cents
* Bond prices soften with risk-on move (Updates with MPR details, adds quote)
TORONTO, Oct 20 (Reuters) - Canada's dollar climbed against the U.S. currency on Wednesday as the greenback tumbled and the Bank of Canada said in its Monetary Policy Report there was still considerable monetary stimulus in place in Canada.
The central bank, which left its benchmark interest rate unchanged on Tuesday, also said it would have to consider any further rate hikes carefully, given the patchy global recovery, a weak U.S. outlook and expected curbs on Canadian growth. [ID:nBCLKLE621]
But the loonie's move higher was largely driven by external factors, said Camilla Sutton, chief currency strategist at Scotia Capital, citing a weak U.S. dollar.
The greenback extended losses against the euro and yen on Wednesday after a report from a U.S. think tank suggested the Federal Reserve planned to boost growth by purchasing $500 billion in Treasury debt over six months. [FRX]
"I think there's been a lot of rumor in the market over speculation on the size of Fed quantitative easing and how soon it will be put in place. That's pushed some U.S. dollar weakness," she said.
"In terms of the MPR: still sounding fairly dovish, noting that heightened tensions in FX is a key vulnerability and also making changes to the growth and inflation forecasts that were highlighted in the statement. But still sounding like at some point the Bank of Canada will be hiking interest rates."
The Canadian dollar CAD=D4 rose to C$1.0240 to the U.S. dollar, or 97.66 U.S. cents, up from Tuesday's finish at C$1.0319 to the U.S. dollar, or 96.91 U.S. cents.
At 10:57 a.m. (1457 GMT), it was at C$1.0250, or 97.56 U.S. cents.
The Canadian dollar had already been higher against the U.S. dollar on Wednesday as appetite for higher-yielding currencies stabilized after being jolted by a surprise interest rate increase by China.
With higher commodity and equity prices, reflecting investor desire for risk, Canadian bond prices mostly softened. [US/] The two-year bond CA2YT=RR fell 2 Canadian cents to yield 1.348 percent, while the 10-year bond CA10YT=RR shed 31 Canadian cents to yield 2.739 percent. (Reporting by Jennifer Kwan; editing by Rob Wilson)
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