TORONTO (Reuters) - Canada’s dollar was a tad lower against its U.S. counterpart on Wednesday, guided by a softer trend in global equity markets, as traders awaited more comments by the Bank of Canada after it signaled the day before it was closer to raising interest rates.
With little direction from flat to lower prices for global stocks, oil and gold, the currency was locked in a tight trading range of C$0.9915 and C$0.9882 against the greenback.
At around 8:05 a.m. EDT (1205 GMT), the Canadian dollar was at C$0.9906 against the U.S. dollar, or $1.0095, down slightly from Tuesday’s finish at C$0.9902 against the U.S. dollar, or $1.0099.
Charles St-Arnaud, economist and currency strategist at Nomura Securities in New York, said the currency would likely remain flat until the release of the Bank of Canada’s Monetary Policy Report (MPR), a quarterly report outlining the bank’s base-case projection for inflation and growth in the Canadian economy, as well as its assessment of risks.
“Most traders are waiting for more precise information from the Bank of Canada later in the MPR and in the subsequent press conference,” said St-Arnaud of the report that is due to be released at 10:30 a.m. (1430 GMT).
“Everyone will be looking at hints of how quickly they’re ready to hike,” he said.
On Tuesday, the Canadian dollar was a leading gainer among major currencies, soaring to a near one-month high and notching its best gain this year after the Bank of Canada kept rates unchanged at 1 percent, as expected, but signaled that it was starting to think more seriously about tightening monetary policy.
The surprisingly hawkish stance by the central prompted a quarter of the country’s primary dealers to pull forward their forecasts for an interest rate hike, according to a Reuters poll, with the central bank now expected to tighten policy early next year. <CA/POLL>
“The opinions diverge quite a lot,” said St-Arnaud. “With the door open now to a rate hike, if we have positive data in Canada and generally good data also globally they could go as soon as June or July, if needed.”
On the other side, there are economists that say the BoC seems to be ready to hike, but it won’t be until 2013, he added.
The median forecast for the timing of the next rate increase is being pushed up to the first quarter of 2013, according to the poll.
Canadian government bond prices were mostly lower across the curve. The yield on the two-year bond, which is especially sensitive to Bank of Canada interest rate moves, rose to 1.354 percent. The benchmark 10-year bond fell 7 Canadian cents to yield 2.077 percent.
Reporting By Jennifer Kwan; Editing by Chizu Nomiyama