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CANADA FX DEBT-Canadian dollar falls by most in three weeks as oil stumbles

 (Adds details throughout; updates prices)
    * Canadian dollar weakens 0.5% against the greenback
    * Touches its strongest intraday level since June 25 at
1.2289
    * Price of U.S. oil settles 1.1% lower
    * Canadian 10-year yield touches its highest since January
2020

    By Fergal Smith
    TORONTO, Oct 21 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as oil prices fell and
Ottawa said it would wind down broad-based pandemic-era economic
support, with the loonie pulling back from an earlier four-month
high.
    The loonie was trading 0.5% lower at 1.2375 to the
greenback, or 80.81 U.S. cents, its biggest decline since Sept.
29. Earlier, the currency touched its strongest level since June
25 at 1.2289.
    "The correlation between the CAD and oil prices remains a
big factor for USD-CAD direction," Ronald Simpson, managing
director, global currency analysis at Action Economics, said in
a note.    
    Oil       , one of Canada's major exports, settled 1.1%
lower at $82.50 a barrel as a forecast for a warm U.S. winter
put the breaks on a rally that drove prices to multi-year highs.
            
    Recent gains for oil prices have contributed to inflation
pressures, with data on Wednesday showing that Canada's annual
inflation rate climbed in September to an 18-year-high. That has
put the focus on the Bank of Canada ahead of an interest rate
decision next week.             
    The data has "served to bolster market confidence in
monetary policy tightening risks in Canada," strategists at
Scotiabank, including Shaun Osborne, said in a note.
    Scotiabank expects the BoC to hike rates by 100 basis points
in the second half of next year, according to a forecast update
on Wednesday. It had previously expected 50 basis points of
tightening.
    Canada will not extend existing broad-based COVID-19 support
programs for companies and individuals when they expire on
Saturday because the economy is recovering well, Finance
Minister Chrystia Freeland said.             
    Canadian government bond yields were higher across the
curve, tracking the move in U.S. Treasuries. The 10-year
            touched its highest level since January last year at
1.693% before dipping to 1.687%, up 3.9 basis points on the day.

 (Reporting by Fergal Smith, Editing by Nick Zieminski)
  
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