CANADA FX DEBT-C$ little changed after string of gains

Tue Jun 24, 2014 9:28am EDT

* Canadian dollar at C$1.0729 or 93.21 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, June 24 (Reuters) - The Canadian dollar was little
changed against the greenback on Tuesday, hovering just below a
5-1/2-month high as a lack of domestic economic data on tap this
week left investors searching for catalysts. 
    The loonie has gained in five out of the previous six
sessions, partly fueled by data at the end of last week that
showed a surprisingly strong rise in Canadian inflation and
robust retail sales.
    The increase in May's annual inflation rate could put
pressure on the Bank of Canada to alter the neutral stance it
has held since last October as it has cited concerns about the
low inflation environment. 
    Analysts say further significant gains in the Canadian
dollar could be difficult without a change in tone from the
central bank. Still, a shift from the Bank of Canada is not
expected in the immediate term.
    "Inflation pushing above 2 percent does make it hard for the
Bank of Canada to be in a truly neutral stance, (which means)
rate cuts as equal as rate hikes," said Don Mikolich, executive
director of foreign exchange sales at CIBC World Markets in
Toronto.
    While the market sees the possibility of a rate cut as
increasingly unlikely, the central bank will still be cautious
not to sound too aggressive, said Mikolich.
    "I don't think the bank is keen - especially now with the
Canadian dollar strengthening - to switch to a more hawkish
stance, which would see the Canadian dollar strengthen and
defeat the gains on the export sector that they're hoping to see
continue," he said.
    The Canadian dollar was at C$1.0729 to the
greenback, or 93.21 U.S. cents, a tad weaker than Monday's close
of C$1.0726, or 93.23 U.S. cents. The currency hit a high of
C$1.0716 in the overnight session, its highest level since the
start of the year.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 2 Canadian cents
to yield 1.133 percent and the benchmark 10-year up
28-1/2 Canadian cents to yield 2.304 percent.












 (Editing by W Simon)
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