*C$ at C$C$0.9864 vs US$ or $1.0138
*Bonds prices fall across curve
*Bank of Canada rate announcement at 9 a.m.
By Claire Sibonney
TORONTO, Sept 7 (Reuters) - The Canadian dollar edged slightly higher against its U.S. counterpart on Wednesday morning as global risk sentiment rebounded and investors awaited a Bank of Canada interest rate decision.
World stocks rose from a two-week low and the euro rallied across the board after Germany’s top court rejected lawsuits aimed at blocking Berlin’s participation in bailout packages for Greece and other euro zone countries. [MKTS/GLOB]
Higher prices, boosted by expectations of lower U.S. crude stocks, also underpinned commodity-linked currencies such as Canada’s, as did better-than-expected Australian growth numbers overnight. [O/R] [ID:nL3E7K70A2]
Matt Perrier, director of foreign exchange sales at BMO Capital Markets, said he expected the Canadian dollar to react more to global factors on Wednesday, and less on the central bank’s policy announcement at 9 a.m. (1300 GMT), in which a more dovish tone has largely been factored in.
Higher interest rates tend to strengthen currencies by attracting international capital flows, and vice versa.
“It depends to what extent the dovishness comes out in the communique,” he said.
“You may get a knee-jerk reaction of some weakness in the currency. I suspect it will be short lived, I think the main focus will be now on the market’s appetite for risk here today.”
A Reuters survey of Canada’s 12 primary securities dealers [nN1E77I1EV] and a separate Reuters poll of 43 forecasters [CA/POLL] unanimously predict the Bank of Canada will keep its overnight target rate at 1 percent.
At 8:02 a.m. (1202 GMT), the Canadian currency CAD=D4 stood at C$0.9864 versus the U.S. dollar, or $1.0138, up from Tuesday’s North American session close at C$0.9898 to the U.S. dollar, or $1.0103.
Canadian bond prices retreated across the yield curve. [US/]
The two-year bond CA2YT=RR was off half a Canadian cent to yield 0.885 percent, while the 10-year bond CA10YT=RR slipped 22 Canadian cents to yield 2.265 percent. (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)