CANADA FX DEBT-C$ weaker on Europe, growth fears; eye on BoC
* C$ at $1.0428 vs US$, or 95.90 U.S. cents * Hits six-month low overnight * Traders eye upcoming ECB, BoC policy meetings * Bond prices mostly lower By Allison Martell TORONTO, June 4 (Reuters) - Canada's dollar weakened against its U.S. counterpart on Monday and touched a six-month low, with investors nervous about Europe's debt crisis and the outcome of the Bank of Canada's Tuesday interest rate announcement. Canada's currency, like its commodity-linked peers, has slumped in recent weeks on fears about the euro zone's problems and signs of weaker global growth. Many think the recent news will spur Canada's central bank to signal it is more reluctant to raise interest rates than it was seven weeks ago. The Bank of Canada's scheduled policy announcement is on Tuesday. "The market's very nervous about the Bank of Canada tomorrow," said Steve Butler, director of foreign exchange trading at Scotiabank. "Last time they came out and they surprised everybody with some hawkish rhetoric, and I think the market's very concerned that tomorrow morning we may see the exact opposite, and the Bank may have to reverse their stance." Butler said given the situation in Europe, as well as concerns about a slowdown in the United States and Asia, the central bank may have little choice but to backpedal. The prospect of higher interest rates tends to help currencies strengthen by attracting international currency flows. The Bank of Canada's main policy rate has been at 1 percent since September 2010. Investors are also waiting to see if policy meetings by the European Central Bank (ECB) and the Bank of England this week will produce any sign that another wave of easing is likely given the weaker-than-expected economic data. At 12:45 p.m. (1645 GMT), the Canadian dollar was at C$1.0428, versus the U.S. dollar, or 95.90 U.S. cents, down from Friday's close at C$1.0394 versus the greenback, or 96.21 U.S. cents. The currency at one point hit C$1.0446, its weakest level since late November. The Canadian dollar is likely to trade in a range of C$1.0350 to C$1.0450 until events later in the week provide further clarity, said Shaun Osborne, chief currency strategist at TD Securities. On Thursday, U.S. Federal Reserve Chairman Ben Bernanke testifies before a congressional committee about the U.S. economy, which could offer more clues about possible policy shifts. Canadian government bond yields were mostly higher on Monday after hitting record lows at the long end of the curve on Friday. Canada's benchmark 10-year bond fell 40 Canadian cents to yield 1.674 percent, after hitting a record low of 1.615 percent at the end of last week. The two-year bond dropped 12 Canadian cents to yield 0.937 percent.
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