October 30, 2019 / 3:06 PM / 14 days ago

CANADA FX DEBT-Loonie hits 2-week low on more cautious Bank of Canada

 (Adds quotes and details on rate decision; updates prices)
    * Canadian dollar falls 0.5% against the greenback
    * Bank of Canada leaves policy rate steady at 1.75%
    * Loonie hits its weakest level since Oct. 17 at 1.3158
    * Canadian bond prices rally across the yield curve

    By Fergal Smith
    TORONTO, Oct 30 (Reuters) - The Canadian dollar weakened to
a near two-week low against the greenback on Wednesday as
investors raised bets on a Bank of Canada interest rate cut next
year after the central bank expressed more concern about global
trade uncertainty.
    The Bank of Canada maintained its key overnight interest
rate at 1.75% as expected but cut domestic and global growth
forecasts, saying the Canadian economy would be increasingly
tested by trade conflicts.
    "The loonie has sold off post-statement due to the fact that
the BoC is beginning to witness the effects of external
headwinds on the Canadian economy," said Simon Harvey, FX market
analyst for Monex Europe and Monex Canada.
    "While this won't be enough to move the needle for a
December rate cut in our view, it does fuel expectations of a Q1
2020 insurance rate cut," Harvey said.
    Chances of an interest rate cut by the end of next year
jumped to more than 80% from about 45% before the rate decision,
data from the overnight index swaps market showed.           
    Bank of Canada Governor Stephen Poloz and Senior Deputy
Governor Carolyn Wilkins are due to hold a news conference at
11:15 a.m. (1515 GMT).
    The U.S. Federal Reserve will announce its interest rate
decision later in the day. It is expected to ease for the third
time since July, which would lower the range for its policy rate
to below the Bank of Canada's equivalent rate for the first time
since December 2016.           
    At 10:37 a.m. (1437 GMT), the Canadian dollar          was
trading 0.5% lower at 1.3154 to the greenback, or 76.02 U.S.
cents. The currency hit its weakest intraday level since Oct. 17
at 1.3158.
    Meanwhile, the U.S. dollar        rose against a basket of
major currencies after data showed that American economic growth
slowed less than expected in the third quarter.             
    U.S. crude oil futures        fell 0.8% to %55.09 a barrel,
pressured by worries about a possible delay in resolving the
U.S.-China trade war. Oil is one of Canada's major exports.
            
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 18 Canadian cents to
yield 1.615% and the 10-year             rising 77 Canadian
cents to yield 1.518%.
    On Monday, the 10-year yield touched its highest intraday
level since July 16 at 1.628%.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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