CANADA FX DEBT-C$ little changed with focus on Bank of Canada

Mon Jul 14, 2014 9:32am EDT

* Canadian dollar at C$1.0731 or 93.19 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Leah Schnurr
    TORONTO, July 14 (Reuters) - The Canadian dollar was little
changed against the greenback on Monday, stabilizing after a
two-week low hit in the previous session as a monetary policy
statement from the Bank of Canada due later in the week kept
investors cautious.
    While the central bank is widely expected to hold rates at 1
percent, where they have been since 2010, the market will be
parsing the bank's statement for its reaction to recent
stronger-than-expected inflation.
    Most analysts expect that the Bank of Canada will stick to
the neutral tone it has held since last October, especially
after Friday's disappointing labor market report.
    "Over the last few weeks with the economic data we've seen,
the domestic environment in Canada has really weakened off, so I
think we'll see the Bank of Canada tip their hat to that," said
Scott Smith, senior market analyst at Cambridge Mercantile Group
in Calgary.
    "There's still a lot of slack in the overall economy that
needs to be worked out before they can start looking at
tightening monetary policy."
    The Canadian dollar was at C$1.0731 to the
greenback, or 93.19 U.S. cents, a tad stronger than Friday's
close of C$1.0734, or 93.16 U.S. cents.
    The loonie gained 1.6 percent through June in a rally fueled
by the robust inflation reading, higher oil prices and short
covering. But the currency's momentum stalled last week as the
Canadian dollar was hit hard by a report that showed the economy
lost jobs in June.
    In the aftermath of that jobs report, Wednesday's statement
from the Bank of Canada could prove to be a fairly pivotal
turning point for the Canadian dollar, said Smith.
    "I think we'll get up into that C$1.0815 level if we do get
a reiteration of their neutral-to-dovish message," said Smith.
    In a relatively light week for domestic data, the inflation
report due at the end of the week will also be a focal point.
Inflation is forecast to hold at a 2.3 percent annualized rate
in June. 
    South of the border, investors will be taking in testimony
from Federal Reserve Chair Janet Yellen on Tuesday and
Wednesday.
    Canadian government bond prices were mostly lower across the
maturity curve, though the two-year was up half a
Canadian cent to yield 1.104 percent. The benchmark 10-year
 was down 6 Canadian cents to yield 2.223 percent.


 (Editing by Meredith Mazzilli)
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