CANADA FX DEBT-C$ steady ahead of Bank of Canada MPR

Thu Jul 23, 2009 7:59am EDT
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 * BoC's Monetary Policy Report in focus
 * C$ hits overnight high of C$1.0966
 * Bond prices extend Wednesday's slide
 By Frank Pingue
 TORONTO, July 23 (Reuters) - The Canadian dollar was mostly
flat versus the U.S. currency on Thursday ahead of the Bank of
Canada's Monetary Policy Report that is expected to elaborate
on the rosier outlook it issued earlier this week.
 On Tuesday, the Bank of Canada left its key interest rate
at 0.25 percent and backed off the hard tone it took toward a
surge in the domestic currency last month, which helped send
the Canadian dollar to its highest level since June 11.
 "There was definite perception that the bank toned down its
concern on the currency and became more tolerant to currency
strength, so we generally expect that to be confirmed in the
MPR," said Adam Cole, global head of FX strategy at RBC Capital
Markets in London.
 "The other thing the bank will do is put flesh on upward
revisions for the growth forecasts ... so again it suggests a
relatively positive tone."
 At 7:45 a.m. (1145 GMT) the Canadian unit was at C$1.0981
to the U.S. dollar, or 91.07 U.S. cents, up from C$1.0985 to
the U.S. dollar, or 91.03 U.S. cents, at Wednesday's close.
 During the overnight session the Canadian dollar built on
momentum from Wednesday's North American session and rose to
C$1.0966 to the U.S. dollar, or 91.19 U.S. cents, before
backing off those levels.
 The Bank of Canada will release the Monetary Policy Report
at 10:30 a.m. and traders will be looking to see if it offers
further details on its economic outlook.
 On Tuesday, the bank forecast the Canadian economy will
shrink by 2.3 percent in 2009, not the 3.0 percent it forecast
in April; and will grow by 3.0 percent in 2010 rather than the
2.5 percent it forecast earlier.
 Canadian bond prices tracked the move in the bigger U.S.
Treasury market and were pinned lower across the curve ahead of
U.S. weekly jobless claims and existing home sales figures due
later in the session.
 The drop in bond prices followed a slide during Wednesday's
session when dealers booked profits a day after U.S. Federal
Reserve Chairman Ben Bernanke ignited a rally when he indicated
the U.S. the economy was too weak to tighten monetary policy.
 The two-year Canada bond was down 2 Canadian cents at
C$100.07 to yield 1.211 percent, while the 10-year bond slipped
10 Canadian cents to C$102.40 to yield 3.460 percent.
 The 30-year bond shed 5 Canadian cents to C$116.35 to yield
4.018 percent. The 30-year U.S. Treasury bond yielded 4.444
  (Editing by Padraic Cassidy)