CANADA FX DEBT-C$ rallies after Fed statement on economy and hike expectations
(Updates throughout with fresh comment, details on Fed, closing figures) * Canadian dollar at C$1.2236 or 81.73 U.S. cents * Bond prices mixed across the maturity curve By Solarina Ho TORONTO, June 17 (Reuters) - The Canadian dollar rallied against a sharply weaker greenback on Wednesday after the Federal Reserve signaled that interest rate increases could start later than anticipated, with the U.S. economy growing moderately though still strongly enough to support a hike by the end of the year. After contracting in the first quarter, the economy is now on track to grow between 1.8 percent and 2.0 percent this year, down from the 2.3 to 2.7 percent range forecast in March, Fed policymakers said. Still, the statement and forecasts keep the U.S. central bank on track to raise rates once or twice over its four remaining policy-setting meetings in 2015. "We've seen a lot of people covering their U.S. dollar long positions," said Rahim Madhavji, president at KnightsbridgeFX.com. "I was a little surprised with the extent of the move. I didn't think it would've been that overly negative. In terms of the longer term picture for the U.S. dollar, it still has all the catalysts going for it." The Canadian dollar, which was mixed against other currency counterparts, finished the session at C$1.2236 to the greenback, or 81.73 U.S. cents, sharply firmer than the Bank of Canada's official close of C$1.2312, or 81.22 U.S. cents, on Tuesday. The currency traded between C$1.2221 and C$1.2393, at one point touching its strongest in about a week. "It's totally a U.S. dollar story. It's driven by U.S. dollar weakness. The Canadian dollar doesn't have a strong catalyst today," said Madhavji. "We look at this as an opportunity to buy U.S. dollars on dips." Data showed Canadian wholesale trade jumped by 1.9 percent in April from March, far more than the 0.3 percent forecast, erasing some declines early in the year. Canadian government bond prices were mixed across the maturity curve, but the two-year price was down half a Canadian cent to yield 0.610 percent while the benchmark 10-year fell 16 Canadian cents to yield 1.756 percent. The Canada-U.S. two-year bond spread was -4.7 basis points, while the 10-year spread was -56.2 basis points. (Reporting by Solarina Ho; Editing by Peter Galloway and James Dalgleish)
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