* C$ at C$1.0374 to US$, or 96.39 U.S. cents
* Bank of Canada rate decision due at 10:00 a.m. EDT
* Fed tapering debate lurks in background
By Alastair Sharp
TORONTO, May 29 (Reuters) – The Canadian dollar was slightly
stronger against its U.S. counterpart in early trading on
Wednesday, gaining some ground ahead of a Bank of Canada rate
decision.
The central bank, in an announcement due at 10:00 a.m.
EDT(1400 GMT), is unanimously expected to hold its benchmark
interest rate steady, with economists focused on whether
outgoing Governor Mark Carney retains the bank’s slightly
hawkish tone.
“The very broad and strong consensus is that the Bank of
Canada will essentially hold the line on everything they said in
previous statements,” said Greg Moore, currency strategist at TD
Securities.
The outside risk of a more neutral stance would likely
pressure the loonie, as Canada’s currency is colloquially known.
At 8:59 a.m. (1259 GMT) the Canadian dollar was
trading at C$1.0374 to the greenback, or 96.39 U.S. cents,
compared with C$1.0395, or 96.20 U.S. cents, at Tuesday’s North
American close.
Once the Bank of Canada news is out, traders expect the
focus to return to the U.S. Federal Reserve and any hints it
will consider slowing the pace of its asset-buying program.
Expectations for a tapering of the stimulus program have
helped yields on Treasuries spike, with Canadian government debt
also rising.
The two-year bond was up half a Canadian cent
early on Wednesday to yield 1.071 percent, while the benchmark
10-year bond rose 17 Canadian cents to yield 2.059
percent.
