CANADA FX DEBT-C$ weakest in two weeks as Bank of Canada trims growth outlook
* Canadian dollar weakens to C$1.3137, or 76.12 U.S. cents * Bond prices rise further across the maturity curve after BoC (Adds details, quote, updates prices) By Alastair Sharp and Leah Schnurr TORONTO/OTTAWA, Oct 21 (Reuters) - The Canadian dollar weakened more than 1 percent against the greenback on Wednesday after the Bank of Canada lowered its growth forecasts for 2016 and 2017, underscoring expectations the central bank is a long way off from raising interest rates. The bank held its key rate steady but said growth would be slower than previously forecast as lower prices for oil and other commodities were dampening business investment and exports in the resource sector. The Canadian dollar weakened after the statement, which some analysts characterized as more dovish, and continued to lose ground through the day, hitting a session low in the early afternoon as a drop in the price of oil also weighed. The day's decline put the loonie at its weakest since Oct. 5. The Bank of Canada has already cut rates twice this year to combat the hit from cheaper oil on the economy. A recent Reuters poll showed analysts do not expect the bank to raise rates until the first quarter of 2017. "If you were of the camp that you thought maybe, just maybe, they might do something toward the middle of next year, you've definitely pushed that down the road now," said Amo Sahota, director at Klarity FX in San Francisco. "It looks like 2016 might be a 'sit on your hands' kind of year as far as rate increases go." The Canadian dollar ended the North American session at C$1.3137 to the greenback, or 76.12 U.S. cents, much weaker than Tuesday's close of C$1.2982, or 77.03 U.S. cents. Sahota expects to see more weakness from the Canadian dollar as its recent rally in the first half of October had more to do with a drop in the U.S. dollar than Canadian fundamentals. "Generally we think dips for U.S. dollar-Canadian dollar are there to be bought into and we'll be heading back up to the C$1.33, C$1.34 area," he said. Canadian government bond prices rose across the maturity curve, with the two-year up 5 Canadian cents to yield 0.533 percent and the benchmark 10-year up 75 Canadian cents to yield 1.458 percent. (Editing by James Dalgleish)
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