CANADA FX DEBT-C$ hits 1-1/2 month low in wake of Bank of Canada shift
* C$ at C$1.0425 vs US$, or 95.92 U.S. cents * Markets continue to absorb Bank of Canada language shift * Canadian bond prices higher across the curve By Leah Schnurr TORONTO, Oct 24 (Reuters) - The Canadian dollar slid to a 1-1/2 month low on Thursday after a policy shift by the country's central bank on Wednesday fueled expectations that interest rates will stay low for longer than had been anticipated. Highlighting weaker-than-expected growth and inflation, the Bank of Canada on Wednesday had dropped any mention of eventual rate increases from its latest policy statement after more than a year of warning that rates will one day have to rise. The central bank has kept rates at 1 percent since 2010, and analysts said the removal of the Bank of Canada's rate-rise bias represented a more neutral tone for policy. A Reuters poll showed Canada's primary dealers now expect the Bank of Canada to maintain rates at 1 percent until well into 2015. "What we're seeing is a continuation of the slap that the Bank of Canada gave the loonie yesterday," said Rahim Madhavji, president of Knightsbridge FX.com in Toronto. "Many people have pushed out any hope of any rate cut in 2014 to now looking at mid- to late-2015." The Canadian dollar ended the North American session at C$1.0425 versus the greenback, or 95.92 U.S. cents, weaker than Wednesday's close of C$1.0384, or 96.30 U.S. cents. The loonie earlier hit a session low of C$1.0438, its weakest since early September. One thing that could help the loonie toward the end of the year is if the Federal Reserve is seen holding off on reducing its economic stimulus until the new year, said Madhavji. "Any time there's more stimulus in the U.S. or any global economy, that benefits the loonie. The loonie is a risk currency, so it's looking for risk appetite around the world." Economic data overseas had little impact on the Canadian dollar as reports showed a gauge of Chinese manufacturing rose to a seven-month high in October, while the euro zone economy was expanding only slowly. Canadian government bond prices were higher across the maturity curve. The two-year bond was up 2-1/2 Canadian cents to yield 1.096 percent and the benchmark 10-year bond gained 9 Canadian cents to yield 2.423 percent.
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