CANADA FX DEBT-C$ lifted by factory data; eyes on Bank of Canada
* Canadian dollar at C$1.1013 or 90.80 U.S. cents * Bond prices mixed across the maturity curve By Leah Schnurr TORONTO, Sept 16 (Reuters) - The Canadian dollar strengthened against the greenback on Tuesday after data showed factory sales rose strongly in July, with the currency extending its recovery from the more than five-month low it hit the previous session. Markets were looking ahead to a speech by the head of the Bank of Canada later in the day. In his first speech since the central bank reaffirmed its neutral policy stance earlier this month, Governor Stephen Poloz will talk on the topic of the role of a floating exchange rate. A press conference will follow. "I don't think he will deviate too much from what we have heard on multiple occasions from the Bank of Canada and Mr. Poloz in particular," said Martin Schwerdtfeger, FX strategist at TD Securities in Toronto. "Relatively recently he has stressed while weaker Canadian dollar might be supportive for some of the Canadian exports, on the other hand it also hinders fixed investment because it makes imported capital goods more expensive." The Canadian dollar had headed into the day's data on a strong footing and then added to its gains after the factory sales report showed a 2.5 percent increase in July, a much faster pace than had been expected. Given the magnitude of that gain, the U.S. dollar might have been expected to retreat further against the loonie, but there is interest to buy the greenback on dips ahead of a statement by the U.S. Federal Reserve on Wednesday, Schwerdtfeger said. The Canadian dollar was at C$1.1013 to the greenback, or 90.80 U.S. cents, stronger than Monday's close of C$1.1050, or 90.50 U.S. cents. Wednesday's policy statement from the Fed will likely be the biggest event of the week as investors speculate that the central bank could provide insight on when it will start to raise interest rates. Any hint that a rate hike will come sooner rather than later would likely boost the greenback against the loonie. A two-day Fed policy meeting was set to begin on Tuesday. After a drop of nearly 2 percent last week, the Canadian dollar touched the C$1.11 level in Monday's overnight session, but it was unable to push through that resistance barrier and has rallied since. A U.S. dollar rally that has lasted for several weeks was starting to look a bit tired, Schwerdtfeger said. "In terms of the technicals, I think there is a risk now that we could see a drop toward C$1.0975, but we'll have to wait. (There are) too many event risks over the next two or three days to see where the trend firms." Canadian government bond prices were mixed across the maturity curve, with the two-year unchanged to yield 1.152 percent and the benchmark 10-year down 1 Canadian cent to yield 2.238 percent. (Editing by Peter Galloway)
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