CANADA FX DEBT-C$ weaker as Bank of Canada points to tougher times
* Canadian dollar at C$1.0263 vs US$, or 97.44 U.S. cents * Central bank holds rates, trims growth forecasts * Hits weakest level since March 19 after central bank news By Alastair Sharp TORONTO, April 17 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday after the Bank of Canada forecast a delayed return to its desired pace of economic growth, while holding to its view interest rates would need to rise at some point. The loonie, as the currency is colloquially known, stuck to a weakening trajectory after the central bank statement, at one point hitting its weakest level in four weeks, but movement was subdued. "There is some weakness going on in the Canadian dollar, but modestly so," said Mazen Issa, macro strategist at TD Securities. The central bank said Canada would likely notch economic growth of 1.5 percent this year, down from its 2 percent forecast in January, and said slack in the economy was continuing to grow. It blamed slower growth in government spending and business investment for the lowered forecast, as well as a sharper contraction in housing activity than it had predicted. The report, in which the central bank also stuck to its oft-repeated view that its next interest rate move would be a rise, helped solidify the loonie's position in the high C$1.02s against the U.S. dollar. After a brief bump stronger right after the report was released, the currency "faded off, likely because of the outlook for growth and the headwinds facing the domestic economy," said Camilla Sutton, chief currency strategist at Scotiabank. By mid-morning the Canadian dollar was changing hands at C$1.0263 to the greenback, or 97.44 U.S. cents, compared with C$1.0205, or 97.99 U.S. cents, at Tuesday's North American close. At one point it hit C$1.02683, its weakest point since March 19. It might have weakened further if the bank had removed its tightening bias altogether, as some economists had predicted it would. "That hawkish tinge helped the loonie weather so far the bank's forecast for growth to slow," Joe Manimbo, a senior market analyst at Western Union Business Solutions, wrote in a note. Canada, which recovered quicker from the global financial crisis than most developed economies, has eschewed the unconventional monetary easing proving so popular at the U.S. Federal Reserve, the Bank of England, and now in drastic fashion at the Bank of Japan. Canadian government debt prices extended their rises across the curve, with the two-year bond up 2 and a half Canadian cents to yield 0.925 percent, while the benchmark 10-year bond rose 32 Canadian cents to yield 1.702 percent.
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