July 20, 2010 / 12:14 PM / in 10 years

CANADA FX DEBT-C$ rangebound ahead of Bank of Canada decision

 * C$ slightly softer at 94.74 U.S. cents
 * Bonds edge higher across the curve
 By Claire Sibonney
 TORONTO, July 20 (Reuters) - The Canadian dollar held in a
tight trading range against its U.S. counterpart on Tuesday as
investors waited on the sidelines for the Bank of Canada's
interest rate decision later in the morning.
 The central bank is widely expected to raise interest rates
for the second time in two months, by 25 basis points to 0.75
percent at 9 a.m. (1300 GMT).
 With the rate hike already factored in, market players are
more focused on what the bank will say about Canada's economic
prospects, given the uneven global economic recovery.
 "I don't think market participants are willing to take any
significant directional bid ahead of the BoC decision and more
importantly the statement," said Matthew Strauss, senior
currency strategist at RBC Capital Markets.
 "If that turns out to be largely in line with market
expectations, then the focus will return to the broader
backdrop ... we're currently seeing as we head into the North
American open, risk aversion seeping back into the market."
 U.S. and Canadian equity futures both pointed lower and oil
prices were under pressure by declines in European stocks over
worries about the U.S. economic recovery and bank exposure to
risky debt. [MKTS/GLOB]
 Higher rates typically help a currency by attracting
capital flows, but Strauss said that has already been priced
 At 7:56 a.m., the Canadian dollar CAD=D4 was at C$1.0555
to the U.S. dollar, or 94.74 U.S. cents, slightly softer than
Monday's finish at C$1.0549 to the U.S. dollar, or 94.80 U.S.
 Strauss said resistance levels to watch were C$1.0581 and
the critical double top at C$1.0679. The support level was seen
at the 200-day moving average of C$1.0411.
 With risk aversion in play, Canadian bond prices edged
higher across the curve.
 The two-year bond CA2YT=RR rose 1 Canadian cent to yield
1.514 percent, while the 10-year bond CA10YT=RR gained 13
Canadian cents to yield 3.151 percent.
  (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)

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