CANADA FX DEBT-C$ strengthens to near one-week high after Bank of Canada news

(Adds details on Bank of Canada decision, economist comments)
    * Canadian dollar at C$1.2954, or 77.20 U.S. cents
    * Traders further unwind rate cut bets

    By Alastair Sharp
    TORONTO, July 13 (Reuters) - The Canadian dollar hit its
strongest level since July 7 against its U.S. counterpart on
Wednesday after the Bank of Canada held rates steady and trimmed
its economic forecasts, as traders unwound bets that the central
bank could cut rates this year.
    At 10:29 a.m. EDT (1429 GMT), the Canadian dollar 
was trading at C$1.2954 to the greenback, or 77.20 U.S. cents,
much stronger than the Bank of Canada's official Tuesday close
of C$1.3030, or 76.75 U.S. cents. 
    It was at C$1.3069 just before the rate decision and outlook
were published, and at one point afterwards touched C$1.2936.
Governor Stephen Poloz will hold a news conference due to start
at 11:15 a.m. EDT. 
    The Bank of Canada cut its growth forecast as disappointing
exports and global uncertainties dampened demand, and warned
that while it expected business investment to rise, it may have
underestimated structural challenges facing industry.
    But economists said the comments did not bolster a minority
view that rates would need to be trimmed this year.
    "While we can't rule it out, I'd say there really isn't much
sense here that the Bank's leaning in that direction, so the
initial reaction has been a stronger Canadian dollar and I think
that's appropriate," said Doug Porter, chief economist at BMO
Capital Markets.
    Overnight index swaps, which track expectations for the
central bank's main policy rate, showed traders reduced bets on
a rate cut following the news.  
    Separately, oil prices fell after the International Energy
Agency warned that a global supply glut threatened a price
recovery and data showed an unexpected weekly gain in U.S. crude
    The Canadian dollar was underperforming most of its key
currency counterparts.
    Canadian government bond prices trimmed gains after the news
but were still higher across the maturity curve, with the
two-year price up 2 Canadian cents to yield 0.495
percent and the benchmark 10-year rising 42 Canadian
cents to yield 1.014 percent.
    "What the market is telling us is that they don't believe
that the Bank of Canada is going to be normalizing rates any
time soon," said Royce Mendes, a senior economist at CIBC
Capital Markets.
    The Canada-U.S. two-year bond spread narrowed to -17 basis
points, while the 10-year spread came in to -46 basis points.

 (Additional reporting by Susan Taylor and Matt Scuffham;
Editing by Nick Zieminski and Jeffrey Hodgson)