* C$ rises to C$0.9725 to the U.S. dollar, or $1.0283
* Bank of Canada seen keeping rates steady
* Global risk sentiment lifted by Greece bailout hopes
TORONTO, May 31 (Reuters) - Canada's dollar rose to its
highest in more than a week against the U.S. dollar on Tuesday,
while bond prices fell, ahead of the Bank of Canada's rate
decision and as global risk sentiment was lifted by Greece
The central bank is widely anticipated to keep its key
interest rate unchanged at 1.0 percent on Tuesday. Most market
participants say the rates will stay that way until the third
quarter when the outlook on the euro zone debt crisis is
clearer and North American economic growth is on firmer
footing. [ID:nN27269933] [CA/POLL]
The day's trading will likely be driven by the Bank of
Canada's statement on Tuesday, as market players look for any
new undertones on the economic outlook and interest rates.
"They've been managing expectations a lot," said Charles
St-Arnaud, Canadian economist and currency strategist at Nomura
Securities International in New York.
"Often, even if data was good, (they've) been trying to
sound more on the pessimistic side so that there's not that
much rate hikes being priced in and avoiding having too much
appreciating pressure on the Canadian dollar."
He said the tone of the statement will probably be more on
the cautious side and that he would mainly look for how the
central bank will characterize the Canadian growth outlook.
The rate decision comes after data showed Canada's economy
gathered speed in the first quarter, expanding at its fastest
pace in a year, as businesses ramped up investment and rebuilt
inventories, though economists warned the growth spurt would
not last long. [ID:nN30235278]
If the bank produces a statement similar to the one in
April -- with no signal it plans raise rates soon -- it could
further weigh on the currency and help underpin bond prices.
A more hawkish-than-expected statement by the central bank
could spur dealers to raise their bets for future rate hikes.
This would likely push up the Canadian dollar and weigh on
interest-rate sensitive T-bill and bond prices, particularly in
the short-dated issues.
At 8:10 a.m. (1210 GMT), Canada's two-year bond
was down 5 Canadian cents to yield 1.526 percent, while the
10-year bond was down 10 Canadian cents to yield
The Canadian dollar
was at C$0.9725 to the U.S.
dollar, or $1.0283, up from C$0.9771 to the U.S. dollar, or
$1.0234, at Monday's close.
The currency, which has been languishing in a
C$0.9735-C$0.9817 range in the last six sessions, popped as
high as C$0.97 to the U.S. dollar, or $1.0309, its highest
since May 20.
The rally was in line with a global rise in riskier assets,
which was helped by a report that Germany could make
concessions to facilitate a new aid package for Greece.
Berlin, which along with some other countries had resisted
extra funding, is considering dropping its push for an early
rescheduling of Greek bonds, the Wall Street Journal said.
Later in the session, Canadian Finance Minister Jim
Flaherty is set to meet with private sector economists to round
out growth forecasts ahead of the introduction of the federal
budget on June 6. [ID:nN25109201]
(Reporting by Ka Yan Ng; Editing by Padraic Cassidy)