* Canadian dollar at C$1.0888 or 91.84 U.S. cents
* Bond prices higher across the maturity curve
(Adds quotes, updates prices)
By Leah Schnurr
TORONTO, Sept 3 (Reuters) - The Canadian dollar strengthened
against the greenback on Wednesday after the Bank of Canada
repeated its neutral policy stance, even as it highlighted new
concern over the stretched household sector.
The loonie had been trading higher heading into the
statement, benefiting from stronger risk appetite in broader
markets as investors were hopeful for a de-escalation of
tensions between Ukraine and Russia.
The currency extended gains to hit a session high following
the Bank of Canada statement, which analysts said was slightly
less dovish than expected.
The bank said recent data reinforced the view that higher
inflation was due to temporary effects and said that an
increasing number of export sectors appeared to be turning the
corner.
"I think essentially what the Bank of Canada is saying is
we're moving along a path that we have always envisioned and
forecasted," said Rahim Madhavji, president at
KnightsbridgeFX.com in Toronto. "Overall, it's just slightly
more optimistic than what was expected and that's driven the
Canadian dollar higher."
The central bank's comments on the household sector also
grabbed the market's attention as it said the risks associated
with household imbalances have not diminished, and it dropped
previous references to the constructive evolution of household
imbalances and a soft landing in the housing market.
Those remarks could be interpreted as having a slightly
hawkish undertone, but should not change the view on interest
rate policy, analysts said.
"It does highlight that they are paying attention to those
financial stability risks but I think we're a long way from
actually threatening an interest rate hike on the back of them,"
said Camilla Sutton, chief currency strategist at Scotiabank in
Toronto.
"I think they're just highlighting them as a concern at this
point, but they do reemphasize that the balance of risks are
still within their comfort zone."
The Canadian dollar ended the North American
session at C$1.0888 to the greenback, or 91.84 U.S. cents,
stronger than Tuesday's close of C$1.0930, or 91.49 U.S. cents.
The statement sent the currency pairing through the 200-day
moving average of C$1.0894, which had been seen as near-term
support.
The loonie has seen some choppy trading in recent sessions
following a large one-day gain last week due to fund flow
speculation stemming from Burger King's bid to buy Tim
Hortons.
The currency is likely to oscillate around the C$1.09 mark,
Madhavji said. "It seems like the loonie is quite comfortable
between C$1.08 and C$1.10, it really doesn't want to break any
of the barriers on either side," he said.
Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 1.120 percent, and the benchmark 10-year
up 7 Canadian cents to yield 2.086 percent.
(Editing by Leslie Adler)