October 21, 2014 / 1:27 PM / 4 years ago

C$ firms on China growth data; central bank eyed

TORONTO (Reuters) - The Canadian dollar firmed against the greenback on Tuesday, boosted by stronger-than-expected economic growth from China, but investors were unlikely to place aggressive bets the day before a policy statement was due from the Bank of Canada.

A Canadian one dollar coin, also know as a loonie, is shown in Montreal, April 28, 2006. REUTERS/Shaun Best

China’s economy grew 7.3 percent in the third quarter, better than the 7.2 percent that had been forecast, but it was still the slowest pace since the global financial crisis. [ID:nL3N0SF3SV]

The loonie is often sensitive to economic news out of China, which is a major consumer of commodities, including oil.

“The slight surprise to the upside has helped to put a bid under risk assets and the commodity-correlated currency space,” said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

The Canadian dollar was also helped by a return of risk appetite to global markets after last week’s rout on concerns about the health of the world economy, said Smith.

The Canadian dollar CAD=D4 was at C$1.1214 to the greenback, or 89.17 U.S. cents, stronger than Monday’s close of C$1.1284, or 88.62 U.S. cents.

The week’s main event, however, will be the monetary policy statement from the Bank of Canada due on Wednesday. The bank will also update its economic forecasts and is widely expected to hold its key interest rate at 1 percent, where it has been for four years.

The central bank is seen likely to keep sending a cautious message, particularly in light of last week’s market turmoil, even after data last week showed inflation in September was at the bank’s 2 percent target. [CA/POLL]

The currency pairing will likely be constrained to a tight range heading into the bank’s announcement, trading between C$1.12 and the mid-C$1.12 area, said Smith.

Canadian government bond prices were lower across the maturity curve, with the two-year CA2YT=RR down 1-1/2 Canadian cents to yield 0.973 percent and the benchmark 10-year CA10YT=RR down 24 Canadian cents to yield 1.964 percent.

Editing by Meredith Mazzilli

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