CANADA FX DEBT-C$ weakens heading into Bank of Canada decision
* Canadian dollar at C$1.0926 or 91.52 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, June 4 (Reuters) - The Canadian dollar weakened against the greenback on Wednesday after data showed an unexpected international trade deficit in April and as a Bank of Canada policy decision later in the morning kept investors wary. After two months of surplus, Canada fell back into a trade deficit in April, with a trade gap of C$638 million ($585 million), while March was revised up to a surplus of C$766 million. The Canadian dollar touched a session low of C$1.0951 after the report that briefly brought the currency to a nearly one-month low. Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada, said the report was a bit of a concern, though he noted the data series is a volatile one. "We'd hoped for more and we still do going forward on the trade side, but these hiccups and volatility in the monthly numbers aren't very encouraging," he said. The market's main focus for the day was on the Bank of Canada, which will announce its interest rate decision at 10 a.m. (1400 GMT). The central bank is expected to keep its benchmark interest rate at 1 percent, but investors will scrutinize the accompanying statement for any change in tone that might provide more insight into the Bank of Canada's policy path. The Bank has repeatedly flagged its concern about the low inflation environment. While the inflation rate picked up in April, analysts say the disappointing economic growth in the first quarter could see the Bank of Canada stick to its neutral tone. If the central bank were to say that it's not worried about inflation returning to its 2 percent target and that underlying inflation is still low, that could be taken as somewhat dovish, said Chandler. "With respect to the currency, that's probably the biggest risk," Chandler said. The Canadian dollar was at C$1.0926 to the greenback, or 91.52 U.S. cents, weaker than Tuesday's close of C$1.0910, or 91.66 U.S. cents. Canadian government bond prices were higher across the maturity curve, with the two-year up 1-1/2 Canadian cents to yield 1.066 percent and the benchmark 10-year up 12 Canadian cents to yield 2.328 percent. (Editing by W Simon)
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