* C$ rises as high as C$1.0842 to the U.S. dollar
* Rallies after Bank of Canada's Monetary Policy Report
* Bank says economy to emerge from recession this quarter
* Bond prices lower across the curve
(Adds details, quote)
TORONTO, July 23 (Reuters) - The Canadian dollar rose to
its highest level against the U.S. currency in seven weeks on
Thursday after the Bank of Canada said the economy will pull
out of recession this quarter.
The central bank also said the world economy has likely
averted a worst-case scenario and is bottoming out.
The Canadian dollar rose as high as C$1.0842 to the U.S.
dollar, or 92.23 U.S. cents, its highest level since June 3.
In its Monetary Policy Report, the bank highlighted that
the rise in the Canadian dollar has been primarily driven by
higher commodity prices and general weakening in the U.S.
dollar, said George Davis, chief technical strategist, RBC
"They're saying it appears to be based on fundamental
developments as opposed to speculative excess," Davis said.
"The market has taken that as a positive as it reduces
their concern that the currency is overshooting right now."
At 11:29 a.m. (1529 GMT), the Canadian dollar was at
C$1.0850 to the U.S. dollar, or 92.17 U.S. cents, up from
C$1.0985 to the U.S. dollar, or 91.03 U.S. cents, at
Canadian bond prices were lower across the curve as money
flowed out of safer government debt and into equities on higher
metals prices and optimism about corporate results. Canadian
bonds were also hurt as the bigger U.S. Treasury market
retested session lows on Thursday after the government
announced a record volume of bond auctions next week.
(Reporting by Jennifer Kwan; editing by Peter Galloway)