* Canadian dlr buoyant after c.bank hints at rate hike
* Dollar dips as Fed's 2-day meeting eyed
* Sterling inches up after inflation data
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
PARIS, June 13 Canada's dollar hit a two-month
high on Tuesday after the Canadian central bank raised the
prospect of an interest rate hike as soon as this year, while
the U.S. dollar inched down as traders eyed the start of a
two-day Federal Reserve meeting.
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 since April 13,
with the currency gaining around 1.5 percent late on Monday and
early on Tuesday to hit C$1.3245 against its U.S. counterpart
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's 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 loonie's U.S. counterpart, meanwhile, inched down
against a basket of currencies ahead of the start of the Fed's
meeting, as the euro inched higher, staying just
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.
"The Fed is likely to remain cautious as recent mixed data
should lead FOMC (Federal Open Market Committee) members to
revise down their projections for both the inflation rate and
the unemployment rate," said Credit Agricole macro strategist
Xavier Chapard, in Paris.
"We expect the 'dot plot' to remain unchanged, pointing to
one additional rate hike this year and three hikes next year."
Sterling rebounded from seven-month lows plumbed the
previous day against the euro and gained 0.6 percent
against the dollar, after data showed British inflation
unexpectedly jumped to its highest level in nearly four years in
Investors were still cautious, though, viewing the pound as
vulnerable to political uncertainty after the shock outcome of
last week's election, in which voters denied any party a
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 and Ed Osmond)