CANADA FX DEBT-Loonie hits 2-week low as Fed muddies outlook for rates

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    * Loonie touches a two-week low at 1.3310
    * Canada's annual inflation rate falls to 1.9% in August
    * Price of U.S. oil decreases 2.1%
    * Canada's 10-year yield touches a six-day low at 1.409%

    By Fergal Smith
    TORONTO, Sept 18 (Reuters) - The Canadian dollar weakened to
a two-week low against its U.S. counterpart on Wednesday as oil
prices fell and after the U.S. Federal Reserve was less dovish
than some investors had anticipated.
    The Fed cut interest rates, as expected, but gave mixed
signals regarding future rate moves, boosting the greenback
    "I think markets were broadly positioning themselves for a
dovish surprise today from the Fed," said Erik Bregar, head of
FX strategy at the Exchange Bank of Canada. "If you were
expecting something dovish, you cover your U.S. dollar short and
you buy dollars and that hurts CAD."
    Meanwhile, the price of oil, one of Canada's major exports,
extended the previous day's declines after Saudi Arabia said it
would quickly restore full production following last weekend's
attacks on its facilities and as U.S. crude stockpiles rose
    U.S. crude oil futures        settled 2.1% lower at $58.11 a
    At 4:22 p.m. (2022 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3285 to the greenback, or 75.27 U.S.
cents. The currency touched its weakest intraday level since
Sept. 4 at 1.3310.
    The decline for the loonie came as data from Statistics
Canada showed that Canada's annual inflation rate dipped to 1.9%
in August from 2.0% in July on lower gasoline prices.
    Still, the average of the Bank of Canada's three preferred
measures of core inflation was little changed at 2.0%, which
could encourage the Bank of Canada to leave interest rates on
hold over the coming months even as some of its global peers
have eased.
    "The inflation numbers as we saw them this morning, they
don't push the Bank of Canada to follow the Fed," said Hosen
Marjaee, senior portfolio manager, at Manulife Asset Management.
    Canadian government bond prices were higher across a flatter
yield curve. The two-year            rose 2.5 Canadian cents to
yield 1.598% and the 10-year             was up 15 Canadian
cents to yield 1.433%.       
    The 10-year yield touched its lowest intraday since Sept. 12
at 1.409%.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Sonya Hepinstall)