CANADA FX DEBT-C$ at nearly 1-week low with Bank of Canada in view

Tue Sep 2, 2014 9:28am EDT

* Canadian dollar at C$1.0906 or 91.69 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Sept 2 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday to its lowest level in nearly a
week, hurt by broad strength in its U.S. counterpart and as
investors were wary of taking big bets a day ahead of a monetary
policy statement from the Bank of Canada.
    The decline saw the loonie unwind some of last week's rally
and brought it closer to the closely watched C$1.09 level. The
Canadian dollar rose 0.6 percent last week, lifted by a number
of factors including fund flow speculation and month-end
positioning.
    But the loonie did not gain on Friday following
better-than-expected domestic economic growth data and that
continued to put the currency on weak footing, said Scott Smith,
senior market analyst at Cambridge Mercantile Group in Calgary.
    At the same time, "we're seeing broad-based U.S. dollar
strength this morning, so that's acting as a detriment towards
the loonie," he said.
    The Canadian dollar was at C$1.0906 to the
greenback, or 91.69 U.S. cents, weaker than Friday's official
close of C$1.0873, or 91.97 U.S. cents from the Bank of Canada.
Many market participants were away on Monday for the Labor Day
holiday.
    While the Bank of Canada is widely expected to hold rates at
1 percent on Wednesday, where they have been since 2010,
investors will be parsing the tone of the policy statement. The
central bank is expected to stick to a cautious message.
 
    "We're very likely to get another balanced statement" that
will temper an improvement in U.S. growth with expectations
Canadian inflation will drift lower, said Smith.
    "They'll be able to remain accommodative until growth really
picks up on a sustainable basis," he said. 
    The jobs report for August will be the other main domestic
economic event this week. Forecasts are for the pace of jobs
growth to remain sluggish with 10,000 positions created last
month.
    The report could get additional scrutiny coming on the heels
of the July report that had to be restated by Statistics Canada
due to an error. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 2-1/2 Canadian
cents to yield 1.119 percent and the benchmark 10-year
 down 60 Canadian cents to yield 2.064 percent.

 (Editing by Meredith Mazzilli)
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