* Ends at C$1.0307 per US$, or 97.02 U.S. cents
* BoC holds rates steady, trims 2010 growth outlook
* Bond prices little changed
(Updates to close, adds quote)
By Jennifer Kwan
TORONTO, Jan 19 (Reuters) - Canada's dollar fell against
the greenback on Tuesday after the Bank of Canada held interest
rates steady and tweaked its growth outlook, citing weak U.S.
demand and a strong Canadian currency as risks to recovery.
The central bank kept its overnight lending rate at 0.25
percent and repeated its conditional commitment to maintain
that level until the end of the second quarter.
It also said it now expects 2010 growth of 2.9 percent,
down from its previous 3.0 percent forecast, and 2011 growth of
3.5 percent, up from its previous 3.3 percent forecast.
The currency fell as low as C$1.0350 to the U.S. dollar, or
96.62 U.S. cents, its lowest level since Jan. 13, from around
C$1.0305 just before the announcement.
"It's in relationship to what the market believes the Bank
of Canada will and will not do. It's pretty clear from their
policy statement that they're in no hurry to raise rates," said
Jonathan Basile, economist at Credit Suisse Securities
"It's going to take some time to get more hawkish. They're
not ready to put that hat on yet."
The Canadian dollar finished at C$1.0307 to the U.S.
dollar, or 97.02 U.S. cents, down from its close of C$1.0265 to
the U.S. dollar, or 97.42 U.S. cents, on Monday.
Doug Porter, deputy chief economist at BMO Capital Markets,
said the market may be interpreting the bank's statement as
"There might have been some expectation in the market that
the bank would be a little bit firmer in when they moved off
their conditional commitment," he said.
"It seems the currency market is interpreting the press
statement as being ever so slightly dovish but the currency was
under pressure in any event heading into this, for broader
All of the 11 primary dealers surveyed last week by Reuters
had forecast the central bank would stand pat on rates this
week and most expected it to keep the key overnight rate at its
current level until the end of the second quarter. All see a
rate hike at some point this year. [CA/POLL]
The market will now turn its focus to Thursday's Monetary
Policy Report, the bank's quarterly economic projection, and an
ensuing press conference by Governor Mark Carney.
Before the bank's statement on Tuesday, the Canadian
currency had sagged as commodity prices lost steam and
investors piled back into the greenback after a holiday weekend
in the United States.
But the currency trimmed losses as the price of oil, a key
Canadian export, rebounded above $79 a barrel as U.S. stocks
rallied, while gold prices were also firmer. [O/R] [GOL/]
Also on Tuesday, a report showed that Canada's composite
leading indicator jumped 1.5 percent in December, the largest
month-on-month increase for almost 27 years, pushed up by
household spending and a surging stock market. [ID:nN19213865]
BONDS LITTLE CHANGED
Canadian bond prices were little changed across the curve,
with virtually muted moves as the Bank of Canada failed to
significantly surprise the market, said Paul-Andre Pinsonnault,
senior fixed-income economist at National Bank Financial.
"There's no reason from the bank and nothing major from the
U.S.," he said.
The two-year Canada bond <CA2YT=RR> ticked 2 Canadian cents
higher to C$99.98 to yield 1.264 percent, while the 30-year
bond <CA30YT=RR> slipped 10 Canadian cents to C$115.75 to yield
Canadian bonds mostly outperformed U.S. issues with the
30-year yield 56 basis points below its U.S. counterpart,
compared to around 54 basis points in the previous session.
Elsewhere, the Bank of Canada said on Tuesday it would
further scale back on extraordinary money market operations it
brought in to cope with the financial crisis, the latest sign
of growing confidence in the recovery. [ID:nN19215667]
(Additional reporting by Claire Sibonney; editing by Rob