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CANADA FX DEBT-Canadian dollar hits 2-year low as inflation pressures ease

 (Adds analyst quotes and details throughout; updates prices)
    * Canadian dollar weakens 0.9% against the greenback
    * Touches its weakest since October 2020 at 1.3374
    * Canada's annual inflation rate slows to 7.0% in August
    * Canadian bond yields fall across the curve

    By Fergal Smith
    TORONTO, Sept 20 (Reuters) - The Canadian dollar weakened to
its lowest level in nearly two years against its U.S.
counterpart on Tuesday as the greenback broadly climbed and
domestic data showed inflation easing more than expected in
August.    
    Canada's annual inflation rate slowed to 7.0% in August,
below analyst forecasts of 7.3% and down from 7.6% in July.
            
    Much of the deceleration was due to lower gasoline prices
and slower gains in the shelter index, but all three core
measures of inflation also eased slightly.
    The data comes ahead of a speech by Bank of Canada Deputy
Governor Paul Beaudry, with the text due to be available on the
central bank's website at 3:30 p.m. ET (1930 GMT).
    Money markets see an 85% probability of a 50-basis-point
interest rate hike by the BoC in October, after having fully
priced in a move of that magnitude before the inflation data.
            
    The inflation data, as well as the selloff in oil and stocks
weighed on the Canadian dollar, said George Davis, chief
technical strategist at RBC Capital Markets, adding that the
"risk-off tone" gave the U.S. dollar a broad-based boost.
    Wall Street fell ahead of a Federal Reserve interest rate
decision on Wednesday, while the price of oil followed other
risk assets lower, settling down 1.5% at $84.45 a barrel. Oil is
one of Canada's major exports.                         
    The Canadian dollar        touched its weakest since October
2020 at 1.3374 per U.S. dollar, or 74.77 U.S. cents, down 0.9%
on the day. Since the start of 2022, the currency has lost 5.5%.
    Canadian government bond yields were lower the curve. The
10-year             eased nearly 5 basis points to 3.103%, while
it fell about 11 basis points further below the equivalent U.S.
rate to a differential of 45.2 basis points.

 (Reporting by Fergal Smith, Editing by William Maclean and
Sandra Maler)
  
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