* C$ hits C$1.0120 vs US$, or 98.81 U.S. cents
* Bond prices edge higher across the curve
By Claire Sibonney
TORONTO, July 4 (Reuters) - The Canadian dollar hovered near
a seven-week high against the U.S. dollar on Wednesday in a very
tight range as grim European economic data was offset by hopes
of more monetary stimulus from central banks.
However, trading activity was subdued with U.S. markets
closed for the Independence Day holiday and ahead of policy
decisions from the European Central Bank and Bank of England on
Thursday.
"The U.S. dollar is generally a bit softer but not by
anything other than a few ticks," said Adam Cole, global head of
FX strategy at RBC Capital Markets in London.
"I think we're just seeing a bit of to-ing and fro-ing ahead
of the event risks that come up in the next couple days in thin
markets with obviously the U.S. being out."
Data on Wednesday showed Germany's services sector
unexpectedly stagnated in June. And while a contraction in
France's services sector eased, business expectations slumped to
their lowest in three years, underlining how bleak conditions in
Europe are.
The reports strengthened expectations the European Central
Bank will cut interest rates to a record low on Thursday in a
move that could drive stock markets higher and further lift
commodities and commodity currencies like the Canadian dollar.
Separately, the Bank of England is seen launching a third
round of monetary stimulus on Thursday, moving to counter a
recession and the effects of a worsening debt crisis in the euro
zone just two months after calling a halt to the program.
At 8:04 a.m. (1204 GMT), the Canadian currency
stood at C$1.0129 versus the U.S. dollar, or 98.73 U.S. cents,
slightly firmer than Tuesday's North American close at C$1.0125
versus the U.S. dollar, or 98.77 U.S. cents.
Earlier in the session, the domestic currency hit a high of
$ 1.0120, or 98.81 U.S. cents, its strongest level since May. 17.
Cole expected the Canadian dollar to stick to a narrow range
between C$1.0120-C$1.0150 heading into Thursday.
Canada's currency is seen weakening over the next six months
before firming to the one-for-one mark with the U.S. dollar, a
Reuters poll showed on Tuesday, helped by the prospect of
central bank easing abroad even as the Bank of Canada looks to
tighten.
Canadian bond prices edged up across the curve. Canada's
two-year government bond rose 3 Canadian cents to
yield 1.033 percent, while the benchmark 10-year bond
added 26 Canadian cents to yield 1.713 percent.