CANADA FX DEBT-C$ firms as Bank of Canada maintains neutral tone

Wed Mar 5, 2014 11:34am EST

* Canadian dollar at C$1.1053 or 90.47 U.S. cents
    * Bank of Canada says still concerned about weak inflation
    * Bond prices mixed


    By Leah Schnurr
    TORONTO, March 5 (Reuters) - The Canadian dollar firmed
against the greenback on Wednesday as analysts interpreted a
policy statement from the Bank of Canada as maintaining the
bank's neutral policy stance.
    The Bank of Canada held rates at 1 percent, and it continued
to express concern about weak inflation and repeated that its
next move on interest rates could be either up or down.
 
    After some choppy initial reaction, the Canadian dollar
ultimately gained ground against the U.S. dollar as analysts
said the central bank had not changed its tone significantly
from its last statement in January.
    "At the end of the day, the bottom line is the same.
Everything is data dependent, (and) on hold for the foreseeable
horizon," said Don Mikolich, executive director of foreign
exchange sales at CIBC World Markets in Toronto.
    "All told, not that much to move us out of our range. I
think we're still stuck in this C$1.10 to mid-C$1.11s," Mikolich
said. The currency is unlikely to have much reason to move out
of that range until Friday's release of employment and trade
data, he said. 
    The Canadian dollar was at C$1.1053 to the
greenback, or 90.47 U.S. cents, stronger than Tuesday's close of
C$1.1100, or 90.09 U.S. cents.
    The Bank of Canada shifted to a more dovish policy stance
last year and left the door open to a cut in interest rates in
its January policy statement, saying it was concerned about the
weak inflation environment.
    The loonie had a positive tone going into Wednesday's
statement, with some support from data overseas that showed
robust growth in the global services sector last month. That was
in contrast with recent data that showed manufacturing growth in
Europe and Asia slowed in February. 
    Markets were generally less nervous about geopolitical risk
on Wednesday than they had been earlier in the week as the
United States and Russia were set to hold talks on easing
tension over Ukraine. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year off 0.1 Canadian
cent to yield 1.030 percent and the benchmark 10-year
 up 6 Canadian cents to yield 2.463 percent.
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