October 31, 2019 / 8:41 PM / a month ago

CANADA FX DEBT-C$ clings to monthly gain as sell-off on dovish BoC runs its course

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    * Canadian dollar trades near flat against the greenback
    * Canadian GDP increases 0.1% in August
    * Loonie rises 0.5% in October
    * Canada's 10-year yield hits a near three-week low at
1.399%

    By Fergal Smith
    TORONTO, Oct 31 (Reuters) - The Canadian dollar was little
changed against its broadly weaker U.S. counterpart on Thursday
as stocks and oil prices fell, with the loonie steadying after
it was pressured the day before by a more dovish tone from the
Bank of Canada.
    At 4:12 p.m. (2012 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3168 to the greenback, or 75.94
U.S. cents. The currency, which hit a near two-week low on
Wednesday at 1.3210, traded in a narrow range of 1.3136 to
1.3178.
    For the month, the loonie was up 0.5%.        
    On Wednesday, Canada's central bank cut its domestic and
global growth forecasts and said the country's economy would be
"increasingly tested" by trade conflicts, as it held its
benchmark interest rate steady at 1.75%.
    Still, the Federal Reserve, which eased on Wednesday for the
third time since July, has lowered the range for its policy rate
to below the Bank of Canada's equivalent for the first time
since December 2016.
    "The reaction that we've seen yesterday following the BoC's
dovishness, I think that's behind us," said Simon Côté, managing
director, risk management solutions, National Bank Financial.
"We are just waiting for tomorrow and the non-farm payroll
number, that's the next potential market-mover."
    The U.S. Labor Department's October jobs data on Friday will
be closely watched after the Fed signaled there would be no
further cuts unless the economy takes a negative turn.
            
    The U.S. dollar        fell on Thursday to a 10-day low
against a basket of currencies, while Wall Street was pressured
by conflicting signals surrounding a possible trade deal between
the United States and China.
    Canada is a major exporter of commodities, including oil, so
its economy could benefit from an improved outlook for global
trade. U.S. crude oil futures        settled 1.6% lower at
$54.18 a barrel.  
    "If the risk-on environment comes back and stocks resume
their uptrend, we are going to go back and test 1.30 again on
USD-CAD," Côté said.
    The steady profile on Thursday for the loonie came as data
from Statistics Canada showed that Canada's economy gained 0.1%
in August, a touch less than analysts expected.             
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 8.5 Canadian cents to yield 1.516% and the benchmark
10-year             was up 36 Canadian cents to yield 1.412%.
    The 10-year yield touched its lowest intraday since Oct. 11
at 1.399%.

 (Reporting by Fergal Smith; Editing by Alistair Bell and Peter
Cooney)
  
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