CANADA FX DEBT-Loonie dips after Poloz remarks as rates seen on hold

Reuters

* C$ at C$1.0491 vs US$, or 95.32 U.S. cents

* Poloz comments bolster view of low rates for longer

* Bond prices mixed across the curve

By Leah Schnurr

TORONTO, Nov 21 (Reuters) - The Canadian dollar weakened

against the greenback on Thursday as comments from the head of

the Bank of Canada bolstered an expectation that interest rates

will remain low for some time.

In an appearance before a Senate committee late on

Wednesday, Bank of Canada Governor Stephen Poloz said the

central bank's economic analysis differed from that of the

Organization of Economic Cooperation and Development (OECD),

which recommended that it start raising interest rates as soon

as 2014.

Last month, the central bank surprised markets with a major

shift in policy, dropping any mention of an eventual rise in

rates after 18 months of explicitly stating that rate hikes were

on the horizon.

"They don't agree, essentially, with what the OECD was

projecting, (which is) higher rates at the end of 2014," said

Benjamin Reitzes, senior economist and foreign exchange

strategist at BMO Capital Markets in Toronto.

"(Poloz) more or less said that, or implied it at least, and

that's driving short-term rates a little lower in Canada and

that's weakening the dollar this morning."

A recent Reuters poll of primary dealers showed the Bank of

Canada is expected to keep its key rate at 1 percent well into

2015.

The Canadian dollar was at C$1.0491 versus the U.S.

dollar, or 95.32 U.S. cents, weaker than Wednesday's North

American close at C$1.0447, or 95.72 U.S. cents.

Investors were also trying to gauge the time-frame for

monetary-policy changes south of the border after U.S. Federal

Reserve minutes released Wednesday showed officials felt that

stimulus could be scaled back in the next few months if the

economy improves enough.

Markets are trying to position for whether the Fed will

begin to taper its purchases at its next meeting in December, or

hold off until 2014.

The loonie slipped to a session low shortly after data

showed the number of Americans filing for new unemployment

benefit claims fell more than expected last week, suggesting

there was some strengthening of conditions in the U.S. labor

market, which is closely watched by the Fed.

"Yesterday's minutes tell us that tapering is at least an

option in December, you'll need to see better data before then,"

said Reitzes.

The Canadian dollar is seen benefiting from the Fed waiting

longer to slow its quantitative easing as that would likely

increase investors' risk appetite and weigh on the U.S. dollar.

Canadian bond prices were mixed across the maturity curve,

with the two-year bond up 5-1/2 Canadian cents to

yield 1.122 percent, while the benchmark 10-year bond

was down 14 Canadian cents to yield 2.653 percent.

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