* C$ rises to 96.02 U.S. cents
* Bonds lower across the curve
TORONTO, July 22 (Reuters) -The Canadian dollar edged higher versus its U.S. counterpart on Thursday as the greenback plunged after Federal Reserve chairman Ben Bernanke painted a gloomy outlook for the U.S. economy, while better-than-forecast euro zone data buoyed riskier currencies.
On Wednesday, Bernanke rekindled unease in his testimony to lawmakers by describing the prospects for the U.S. economy as "unusually uncertain", sending the U.S. dollar to a seven-month low. [FRX/]
"Essentially what he's telling us is that rates are on hold for a very, very long time," said Camilla Sutton, senior currency strategist at Scotia Capital.
"There's moderate growth, a gradual decline in unemployment and subdued inflation for many years to come and that implies rates are on hold for a long time, which is a U.S. dollar negative."
But a jump in new manufacturing orders and services activity in Germany gave investors some reassurance. [ID:nSLALIE68Q]
Sutton added that market speculation on China's new foreign exchange policy is also driving the greenback lower.
China on Thursday sent its clearest signal yet that it is determined to steer the value of the yuan in relation to a basket of currencies, not the U.S. dollar. [ID:nTOE66L07K]
At 8:03 a.m. (1203 GMT), the Canadian currency was
at C$1.0414 to the U.S. dollar, or 96.02 U.S. cents, up from
Wednesday's finish at C$1.0477 to the U.S. dollar, or 95.45
U.S. cents.Sutton expected the day's range for the Canadian dollar to be fairly wide at C$1.0333 to C$1.0486.
World stocks and commodities also reversed earlier losses and U.S. and Canadian equity futures pointed to a stronger start. [MKTS/GLOB]
Later in the morning, markets will be looking at Canadian
retail sales data for May, as well as several reports on U.S.
housing. As well, the Bank of Canada should provide more details on its view of the economy in its Monetary Policy Report, followed by a press conference by Governor Mark Carney. And Bernanke will speak to Congress again for the second day of his semiannual testimony.
"Risks are high today in a sense that we know that CAD is well correlated with interest rates right now and we have both the MPR and further commentary from Bernanke," said Sutton.
The publication of European bank stress tests, due on Friday, also kept investors cautious.
With some risk appetite seeping back into the market, Canadian bond prices were lower across the curve, tracking U.S. Treasuries down. [US/]
The two-year bond lost 4 Canadian cents to yield 1.540 percent, while the 10-year bond shed 27 Canadian cents to yield 3.192 percent. (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)
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