CANADA FX DEBT-C$ softer after factory data, eye on Bank of Canada

* C$ at C$1.0425 vs US$, or 95.92 U.S. cents
    * Manufacturing data shows moderate growth
    * Bank of Canada rate decision, outlook in focus

    By Alastair Sharp
    TORONTO, July 16 (Reuters) - The Canadian dollar was weaker
against the U.S. dollar in early trade on Tuesday after domestic
manufacturing data showed modest gains, with traders largely
focused on Wednesday's highly anticipated Bank of Canada policy
    Canadian factory sales in May rose 0.7 percent from April,
making up some of the ground lost during a plunge that month.
    The "numbers were close enough to consensus; it didn't give
a strong signal in either direction," said Greg Moore, a
currency strategist at TD Securities.
    Instead, investors are mostly looking to the first interest
rate decision by new Bank of Canada Governor Stephen Poloz on
Wednesday, which coincides with a quarterly Monetary Policy
Report outlining the central bank's view of the economy.
    Economists polled by Reuters expect the central bank to
leave its benchmark rate unchanged at 1 percent and repeat its
warning that the next move in rates will be an increase.
    But with slow growth and low inflation, a rate increase is
not expected until the fourth quarter of 2014. 
    Moore said there is a risk that the central bank will send a
more neutral message, which could prompt further Canadian dollar
    The Canadian dollar has slipped in recent sessions, partly
on concern about how much the central bank might cut growth
forecasts and the risk Poloz could send dovish signals.
    The currency traded as low as C$1.0442 to the U.S. dollar,
or 95.77 U.S. cents, its weakest level since July 11.
    At 9:12 a.m. (1312 GMT) the Canadian dollar was
trading at C$1.0425 to the greenback, or 95.92 U.S. cents,
compared with C$1.0415, or 96.02 U.S. cents, at Monday's North
American close.
    The loonie, as Canada's currency is colloquially known, fell
sharply against its commodity-linked cousin, the Australian
dollar, after minutes from that country's last central
bank meeting provided a less-dovish message than investors were
    The price of Canadian government debt was higher across the
curve, with the two-year bond up 2 Canadian cents to
yield 1.122 percent, while the benchmark 10-year bond
 rose 3 Canadian cents to yield 2.412 percent.