Canadian dollar little changed ahead of Bank of Canada rate announcement

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TORONTO - The Canadian dollar was little changed ahead of the mid-morning announcement by the Bank of Canada on interest rates.

The loonie was off 0.03 of a cent to 91.07 cents US. The bank is expected to leave its key rate at one per cent, where it's been since September 2010.

But analysts say the currency could see bigger moves later in the day, depending on what the central bank has to say about the economy and its language on future rate hikes.

"We expect that the bank maintains its neutral stance with policy changes still dependent on new information and shifts in the balance of risks," said Camilla Sutton, Chief FX Strategist, Scotiabank Global Banking and Markets.

"The shifts since the last meeting have been favourable, with manufacturing sales, retail sales, consumer price index, gross domestic product and employment all coming in well above estimates. However the BoC will be cautious not to sound too optimistic, for fear of an appreciating Canadian dollar."

The central bank will also release its latest Monetary Policy Report and governor Stephen Poloz is holding a news conference later in the morning.

Meanwhile, prices for oil and metals rose in the wake of signs that economic growth in China held up better than expected during the first quarter.

The world’s second-largest economy grew 7.4 per cent from a year earlier in the January-March quarter, down from the previous quarter’s 7.7 per cent. It was the weakest growth in China since the 2008-09 global crisis and there was relief that the figure wasn't as bad as some had feared.

It also indicated that the Chinese government is prepared to continue to take further measures to support growth.

"The government has announced a number of modest stimulus measures in the last month, including an acceleration in rail investment and selective tax cuts, and appears ready to do more, if necessary, to defend its recently reconfirmed 7.5 per cent target for growth in 2014," said CIBC senior economist Peter Buchanan.

"We continue to look for an increase in GDP of about 7.6 per cent this year."

The May crude contract on the New York Mercantile Exchange gained $1.04 to US$104.79 a barrel.

The May copper contract rose three cents to US$3.02 a pound while June bullion was unchanged at US$1,300.30 an ounce.

Organizations: Bank of Canada, Scotiabank Global Banking, CIBC New York Mercantile Exchange

Geographic location: TORONTO, US, China

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