* Canadian dollar at C$1.0266 vs US$, or 97.41 U.S. cents
* Central bank holds rates, trims growth forecasts
* C$ weakest since March 13 after central bank news
By Alastair Sharp
TORONTO, April 17 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday after the Bank of
Canada chopped its growth forecasts, although losses were likely
restricted by the bank holding to its view that interest rates
would need to rise at some point.
The loonie, as the currency is colloquially known, stuck to
a weakening trajectory after the central bank statement, at one
point hitting its weakest level in more than four weeks, but
movement was relatively subdued.
It would likely have pushed through C$1.03 if the central
bank had dropped its eventual tightening bias, one analyst said.
"From a trading perspective dollar/CAD buyers were hoping
for hints of a more neutral stance, when that didn't come they
chose to lighten up their positions," said Adam Button, a
currency analyst at ForexLive in Montreal, who also noted strong
corporate buying interest as it approached that level.
The Canadian dollar ended the session changing
hands at C$1.0266 to the greenback, or 97.41 U.S. cents,
compared with C$1.0205, or 97.99 U.S. cents, at Tuesday's North
American close.
The central bank said Canada would likely notch economic
growth of 1.5 percent this year, down from its 2 percent
forecast in January, and said slack in the economy was
continuing to grow.
It blamed slower growth in government spending and business
investment for the lowered forecast, as well as a sharper
contraction in housing activity than it had predicted.
The report, in which the central bank also stuck to its
oft-repeated view that its next interest rate move would be a
rise, helped solidify the loonie's position in the high C$1.02s
against the U.S. dollar.
After a brief bump stronger right after the report was
released, the currency "faded off, likely because of the outlook
for growth and the headwinds facing the domestic economy," said
Camilla Sutton, chief currency strategist at Scotiabank.
At one point it hit C$1.0295, its weakest point since March
13.
It might have weakened further if the bank had removed its
tightening bias altogether, as some economists had predicted it
would.
"That hawkish tinge helped the loonie weather so far the
bank's forecast for growth to slow," Joe Manimbo, a senior
market analyst at Western Union Business Solutions, wrote in a
note.
Canada, which recovered quicker from the global financial
crisis than most developed economies, has eschewed the
unconventional monetary easing proving so popular at the U.S.
Federal Reserve, the Bank of England, and now in drastic fashion
at the Bank of Japan.
The Bank of Canada is "following a very similar script to
the last statement and there really hasn't been much in the way
of any significant change," said Darcy Briggs, a fixed-income
portfolio manager with the Bissett unit of Franklin Templeton
Investments.
"We haven't seen too much in the way of any significant
market reaction out of that."
The price of Canadian government debt rose across the curve,
with the two-year bond up 1 Canadian cent to yield
0.933 percent, while the benchmark 10-year bond rose
23 Canadian cents to yield 1.712 percent.
Yields on overnight index swaps, which trade based on
expectations for the policy rate, showed traders slightly scaled
back their bets of a rate cut later this year.