TORONTO (Reuters) - The Canadian dollar held on to gains against its U.S. counterpart on Wednesday as investors braced for any soothing words from the U.S. Federal Reserve and the European Central Bank they will take action to prop up their economies.
The U.S. central bank is likely to show on Wednesday that it is ready to act to support a weakening U.S. economy but stop short of aggressive measures for now.
"I think the market is just consolidating ahead of the FOMC announcement this afternoon. The U.S. dollar is generally softer and risk is relatively well bid heading into the announcement on the hope that the Fed delivers some sort of additional easing measures," said Matt Perrier, a director of foreign exchange sales at BMO Capital Markets.
At around 7:40 a.m. EDT (1140 GMT), the Canadian dollar was at C$1.0017 against the greenback, or 99.83 U.S. cents, a little higher than Tuesday's North American finish at C$1.0029 against the greenback, or 99.71 U.S. cents.
The currency added roughly 1 percent for July.
Investors are also focused on the ECB's Thursday meeting to see how it plans to make good on promises by its president, Mario Draghi, to preserve the euro.
Canadian bond prices slipped across the curve with the two-year bond off 1 Canadian cent to yield 1.081 percent, and the benchmark 10-year bond down by 12 Canadian cents to yield 1.689 percent.
Editing by James Dalgleish