June 12, 2019 / 2:02 PM / in 14 days

CANADA FX DEBT-C$ steadies as lower oil prices offset Fed rate cut bets

    * Canadian dollar trades in a range of 1.3279 to 1.3304
    * Price of U.S. oil falls 2%
    * Canadian bond prices edge higher across steeper yield
curve

    TORONTO, June 12 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Wednesday, having pulled
back from a three-month high from earlier in the week, as lower
oil prices countered tame U.S. inflation data.
    The price of oil, one of Canada's major exports, was weighed
down by a weaker outlook for demand and a rise in U.S. crude
inventories despite expectations of extended supply cuts led by
OPEC. U.S. crude oil futures        were down 2.0% at $52.20 a
barrel.                 
    U.S. consumer prices barely rose in May, pointing to
moderate inflation that together with a slowing economy could
increase pressure on the Federal Reserve to cut interest rates
this year.             
    The loonie has benefited this month from expectations that
the Bank of Canada will cut interest rates less than the Federal
Reserve.
    Money markets see about a 50-percent chance of a Bank of
Canada interest rate cut by December, while they are pricing in
at least two cuts over the same period by the Fed.
                    
    At 9:44 a.m. (1344 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3287 to the greenback, or 75.26
U.S. cents. The currency, which touched on Monday its strongest
level since March 1 at 1.3226, traded in a range of 1.3279 to
1.3304.
    With under three weeks to go before proposed talks between
the Chinese and U.S. leaders, expectations for progress toward
ending the trade war are low and sources say there has been
little preparation for a meeting even as the health of the world
economy is at stake.             
    In addition to being a major exporter of commodities, Canada
runs a current account deficit, so its economy could be hurt by
a slowdown in the global flow of trade or capital.
    Canadian government bond prices were higher across much of a
steeper yield curve in sympathy with U.S. Treasuries. The
two-year            rose 3.5 Canadian cents to yield 1.46% and
the 10-year             gained 2 Canadian cents to yield 1.525%.
    On Tuesday, the 10-year yield touched its highest intraday
in eleven days at 1.543%.

 (Reporting by Fergal Smith
Editing by Nick Zieminski)
  
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