CANADA FX DEBT-C$ up, bonds mixed ahead of GDP data, BoC eyed

Mon May 30, 2011 8:11am EDT
 
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 * C$ edges up to C$0.9754 to the U.S. dollar, or $1.0252
 * Bond prices mixed
 * GDP, Bank of Canada are key events this week
 TORONTO, May 30 (Reuters) - The Canadian dollar was
moderately firmer against the U.S. currency on Monday ahead of
data that will show how the economy fared in the first
quarter.
 Canadian bond prices were mixed, with Canada's short end on
the rise ahead of the data and the Bank of Canada's rate
decision on Tuesday.
 The economy is expected to have bounced back in March after
it contracted in February for the first time since last
September, rounding off a strong first quarter overall.
 If forecasts are accurate, annualized quarterly growth,
forecast to grow 4 percent, would be the strongest since the
5.5 percent rate in the first quarter of 2010. For more see
[ID:nN27256435].
 However, the currency's reaction to the data may be more
muted than usual, given the Bank of Canada rate decision on
Tuesday.
 The central bank is widely expected to keep its key rate
steady at 1 percent. [ID:nN27269933]
 "It's not like the central bank is poised to move, and it's
not waiting for one piece of information to decide one way or
the other," said Paul Ferley, assistant chief economist at
Royal Bank of Canada.
 "But it could shape how they characterize the economy."
 A Reuters survey of economists and global strategists last
week expected the Bank of Canada will raise interest rates some
time in the third quarter, with forecasters split between
whether there will be one or two 25-basis-point increases in
the period. [ID:nN26157496] [CA/POLL]
 Swaps traders have priced in a reduced likelihood of rate
hikes for the remainder of 2011. BOCWATCH
 RBC was among several Canadian primary dealers this month
to have pushed back their rate-hike forecasts from July to
September, citing the Bank of Canada's recent concern about
developments abroad, such as the euro zone debt crisis.
 "Our sense is the bank will just take the opportunity to
monitor the situation, holding interest rates unchanged," said
Ferley, adding that external and domestic data will likely be
strong enough by September to warrant a return to tightening
policy.
 At 8 a.m. (1200 GMT), the Canadian currency CAD=D4 was at
C$0.9754 to the U.S. dollar, or $1.0252, up from Friday's North
American session close at C$0.9773 or $1.0232.
 Canada's rate-sensitive two-year bond CA2YT=RR was up 4
Canadian cents to yield 1.507 percent, while the 10-year bond
CA10YT=RR slipped 16 Canadian cents to yield 3.063 percent.
 Activity was also thinner than usual due to the Memorial
Day holiday that will keep U.S. markets closed on Monday.
 (Reporting by Ka Yan Ng; Editing by James Dalgleish)