* Canadian dlr buoyant after c.bank hints at rate hike
* Dollar steady as Fed's 2-day meeting eyed
* Sterling inches up after Monday's falls
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
PARIS, June 13 The Canadian dollar climbed in an
otherwise quiet trading day on Tuesday, hitting its highest
level in nearly two months after comments from Canada's central
bank raised the prospect that interest rates could rise as soon
as this year.
The U.S. dollar appeared to be treading water, as traders
awaited the start of a two-day meeting of the U.S. Federal
Reserve for signals on the pace of future monetary tightening.
Bank of Canada Senior Deputy Governor Carolyn Wilkins said
late on Monday that first-quarter growth in the North American
country had been "pretty impressive", and that signs economic
growth was broadening would lead the central bank to consider
whether current low rates would still be required.
The comments sent the Canadian dollar - or the "loonie", as
it is known by traders - to its highest level in almost two
months, with the currency gaining almost 1.5 percent late on
Monday and early on Tuesday to trade at C$1.3269 against its
While many economists had expected the bank to start raising
in 2018, markets were pricing in a 52 percent chance of a hike
by the end of 2017 following Wilkins' speech.
"The market had been overlooking the strengthening economic
data from Canada, and obviously now that we’re starting to see
some change in communication from the Bank of Canada to
acknowledge that ... the market won’t be able to look through
that," said MUFG currency economist Lee Hardman, in London.
"The shift to a more hawkish stance will offer the potential
for the Canadian dollar to strengthen further from here."
The U.S. dollar was steady against a broad basket of
currencies, while the euro held just above $1.12.
With the Fed widely expected to raise interest rates when it
concludes its meeting on Wednesday, investors' focus will be on
any fresh hints on the pace of hikes in the months to come, and
its assessment of the economy and outlook on inflation.
Investors will also be watching for any fresh details on the
central bank's plans for trimming its balance sheet.
"Given that the minutes (of the last Fed meeting) contained
lots of details, one possible scenario is that there will be an
announcement in June and that it will start in September," said
Masafumi Yamamoto, chief currency strategist for Mizuho
Securities in Tokyo, referring to the Fed's possible balance
The greenback firmed a little against the yen, trading up
0.2 percent on the day at 110.18 yen. The Bank of Japan
holds a policy meeting on Thursday and Friday.
Sterling edged up from seven-month lows plumbed the previous
day against the euro, though investors were still
cautious, viewing the pound as vulnerable to political
uncertainty after the shock outcome of last week's elections, in
which voters denied any party a parliamentary majority.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Masayuki Kitano in Singapore; Editing
by Andrew Heavens)