October 29, 2019 / 8:26 PM / 19 days ago

CANADA FX DEBT-C$ pulls back as bullish sentiment ebbs ahead of rate decisions

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar weakens 0.3% against the greenback
    * Loonie touches strongest intraday since July 22 at 1.3043
    * Price of U.S. oil decreases 0.5%
    * Canadian bond prices rise across the yield curve

    By Fergal Smith
    TORONTO, Oct 29 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday, retreating from an earlier
three-month high as positive investor sentiment was tempered
ahead of interest rate decisions by the Bank of Canada and the
Federal Reserve.
    The S&P 500 eased back from a record high after a U.S.
administration official told Reuters that Washington and Beijing
were continuing to work on an interim trade agreement but that
it may not be completed in time for the leaders of the two
countries to sign in Chile next month.             
    "We have seen a little bit of client sentiment that maybe
risk assets have gone too far, you're going to see a little bit
of a retracement," said Scott Lampard, head of global markets at
HSBC Bank Canada. "It feels like it is more trading activity as
opposed to anything more structural right now."
    The loonie has rallied about 2% since early October, buoyed
by robust domestic jobs data and investor optimism that a
U.S.-China trade deal could boost Canada's commodity-linked
economy.
    "Those that have had a bullish Canadian dollar view and
position have gotten some satisfaction the last number of weeks
as the data in Canada has held up well," Lampard said.         
    The Bank of Canada is likely to keep interest rates steady
at 1.75% on Wednesday in its first policy announcement since
last week's federal election, despite signs that investors
seeking higher-yielding currencies are shifting more money into
Canadian dollars.             
    The Fed is also due to make an interest rate announcement on
Wednesday. It is expected to lower the range for its policy rate
to below the Bank of Canada's equivalent rate for the first time
since December 2016.                            
    At 3:40 p.m. (1940 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3094 to the greenback, or 76.37 U.S.
cents. The currency's weakest level of the session was 1.3096,
while it touched its strongest level since July 22 at 1.3043.
    The decline for the loonie came as the price of oil, one of
Canada's major exports, lost ground for a second day. U.S. crude
oil futures        settled 0.5% lower at $55.54 a barrel.
            
    Canadian government bond prices were higher across the yield
curve, with the two-year            up 2 Canadian cents to yield
1.7% and the 10-year             rising 22 Canadian cents to
yield 1.595%.
    On Monday, the 10-year yield touched its highest intraday
level since July 16 at 1.628%.

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