CANADA FX DEBT-C$ firms ahead of Bank of Canada policy statement
* Canadian dollar at C$1.0959 or 91.25 U.S. cents * Bond prices lower across the maturity curve By Leah Schnurr TORONTO, Jan 22 (Reuters) - The Canadian dollar firmed modestly against the greenback on Wednesday, consolidating after hitting a four-year low in the previous session and as investors awaited an imminent policy statement from the Bank of Canada that some expect could see the central bank turn more dovish. The loonie has lost more than 6 percent since late October last year when the Bank of Canada shifted policy by dropping any talk of interest rate hikes after 18 months of signaling that policy tightening was on the horizon. The sell-off has deepened in recent weeks and the currency broke through the psychologically important C$1.10 level on Tuesday. Just three weeks into 2014, the U.S. dollar has appreciated more than 3 percent against the Canadian dollar. After some disappointing economic data earlier this month, including a surprise increase in the unemployment rate, markets are positioning for the Bank of Canada to sound more dovish when it releases its policy statement on Wednesday. The Bank of Canada will also announce a decision on interest rates and release its Monetary Policy Report at 10 a.m. (1500 GMT), providing a quarterly update of its economic forecasts. The central bank is widely expected to keep rates at 1 percent. "We think they're going to sound a little bit more dovish but will stop short of adopting an outright easing bias," said Benjamin Reitzes, senior economist at BMO Capital Markets in Toronto. While the Bank of Canada could lower their inflation forecast, "from a growth perspective, things actually look pretty decent, and that's what keeps them from adopting that easing bias," said Reitzes. The Canadian dollar was at C$1.0959 to the greenback, or 91.25 U.S. cents, firmer than Tuesday's close of C$1.0972, or 91.14 U.S. cents. Canadian government bond prices were lower across the maturity curve, with the two-year off 2 Canadian cents to yield 1.042 percent and the benchmark 10-year down 7 Canadian cents to yield 2.517 percent.
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