October 16, 2019 / 9:34 PM / a month ago

CANADA FX DEBT-Canadian dollar recovers as investors bet on Brexit deal

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar near flat against the greenback
    * Canadian inflation holds steady at 1.9% in September
    * Price of U.S. oil increases 1%
    * Canadian bond prices rise across a steeper yield curve 

    By Fergal Smith
    TORONTO, Oct 16 (Reuters) - The Canadian dollar was little
changed against its U.S. counterpart on Wednesday, clawing back
its earlier decline as the potential for a last-minute Brexit
deal weighed on the greenback.
    The U.S. dollar        fell across the board as dismal U.S.
retail sales data painted a gloomy picture of the economy and as
sterling        and the euro        benefited from hopes that
Britain and the European Union were on the verge of an amicable
divorce deal.                         
    "It seems like we are getting closer and closer to a deal
between the EU and the U.K.," said Bipan Rai, North America
head, FX strategy, at CIBC Capital Markets. "You are seeing some
of that positioning off-loaded across the board and that has put
the (U.S.) dollar on the defensive, and several currencies have
gained as a result."
    Canada is a major exporter of commodities, including oil, so
its economy could benefit from reduced global trade uncertainty.
    Oil prices were supported by signs that OPEC and allied
producers will continue to curb supplies in December. U.S. crude
oil futures        settled 1% higher at $53.36 a barrel.
            
    At 5 p.m. (2100 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3197 to the greenback, or 75.77
U.S. cents.
    The currency, which notched a one-month high on Friday at
1.3171 after data showing a second straight month of blockbuster
Canadian job gains, traded in a range of 1.3184 to 1.3243.     
    Canada's annual inflation rate held steady at 1.9% in
September, falling short of the 2.1% rate that analysts had
expected, data on Wednesday from Statistics Canada showed.
            
    Still, the average of the Bank of Canada's three core
measures edged up to 2.1% from 2.0%, cementing expectations for
the central bank to leave its benchmark interest rate on hold at
1.75% later this month.           
    Canadian government bond prices were higher across a steeper
yield curve, with the two-year            up 4 Canadian cents to
yield 1.668% and the 10-year             rising 14 Canadian
cents to yield 1.548%.
    On Tuesday, the 10-year yield touched its highest level
intraday in nearly one month at 1.577%.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and
Alistair Bell)
  
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