* Bank of Canada gives no hint of next rate hike
* C$ eases to session low
* Short-dated bonds tip higher (Adds details)
By Ka Yan Ng
TORONTO, March 1 (Reuters) - The Canadian dollar retreated from a three-year high against the U.S. currency on Tuesday morning and short-dated bond prices perked up after the Bank of Canada left interest rates unchanged and gave no signal it plans to raise them soon.
The Canadian dollar CAD=D4 fell as low as C$0.9735 to the U.S. dollar, or $1.0272, after the bank's announcement from C$0.9714, or $1.0294, just before, a level that matched Monday's North American close.
Early in the day it rose as high as C$0.9684 to the U.S. dollar, or $1.0326, its highest level since November 2007.
By 9:40 a.m. (1440 GMT), it was at C$0.9725 to the U.S. dollar, or $1.0283.
The interest rate-sensitive two-year bond CA2YT=RR turned positive, edging up 4 Canadian cents to yield 1.824 percent.
"The dollar is certainly weakening. I think you're seeing a little bit of giveback in some of the (yield curve) short end but mostly it's a Canadian dollar story at this point," said David Tulk, chief Canada macro strategist at TD Securities.
The Bank of Canada maintained its benchmark rate at 1 percent. It also repeated the language that it used in its January rate announcement, saying that while considerable monetary stimulus remains in place, "any further reduction in monetary policy stimulus would need to be carefully considered." For more see [ID:nBCL1EE72W].
"They slightly upgraded their outlook for the Canadian economy, acknowledging that the recovery has been proceeding slightly faster than expected," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
"However, they still expressed concerns about challenges presented by persistent strength in the Canadian dollar and Canada's poor productivity performance. On balance it suggests no imminent rate move."
Ferley said he still expects the central bank to lift rates in May, matching the median view in a recent Reuters poll on Canadian interest rates. [CA/POLL]
Overnight index swaps, which trade based on expectations for the key central bank rate, showed investors see a 92.2 percent probability that rates will stay on hold at the Bank of Canada's next policy announcement date on April 12, up slightly from before the announcement. Views of the chances of a May hike fell slightly as well. BOCWATCH
Analysts had been geared up for stronger language from the central bank on the Canadian economic outlook after Monday's fourth-quarter GDP data exceeded forecasts.
The data signaled momentum in the economy, and had bolstered the view that the central bank will resume hiking interest rates in the first half of the year. [ID:nN28244249]
Before Tuesday's rate announcement, the Canadian dollar hit its highest level since the start of the global financial crisis as its U.S. counterpart came under broad selling pressure on expectations that interest rates would rise more quickly in other parts of the world than in the United States.
There was also caution ahead of closely watched congressional testimony from U.S. Federal Reserve Chairman Ben Bernanke. [FRX]
Over the near term, analysts said there are few technical barriers stand in the Canadian currency's path, while firm oil prices are a supporting factor. [ID:nN17237763]
"Realistically, below this 97-cent level, there are few technical spots. This is sort of reminiscent of last time we were down here with oil skyrocketing and the Canadian dollar following along," Curran said.
"I don't think it'll be sustainable over the long period," he added. (Reporting by Ka Yan Ng, Solarina Ho and Claire Sibonney; Editing by James Dalgleish and Peter Galloway)