CANADA FX DEBT-Canadian dollar claws back weekly loss as oil jumps – Today

* Canadian dollar gains 0.2% against the greenback

* For the week, the loonie was barely changed

* Price of oil settles 5.8% higher

* 2-year yield climbs 3.2 basis points

TORONTO, Oct 13 (Reuters) – The Canadian dollar edged
higher against its U.S. counterpart on Friday as the price of
oil, one of Canada’s major exports, moved sharply higher and
investors raised bets on another Bank of Canada interest rate
hike later this month.

The loonie was trading 0.2% higher at 1.3660 to the
greenback, or 73.21 U.S. cents, after moving in a range of
1.3637 to 1.3694. For the week, it was nearly unchanged.

“I think oil prices going up is definitely helping but it is
still a very small movement (for the currency) in that regard,”
said Amo Sahota, director at Klarity FX in San Francisco.

Oil settled 5.8% higher at $87.69 a barrel as
investors priced in the possibility that the conflict in the
Middle East could widen as Israel began ground raids inside the
Gaza Strip.

Bank of Canada Governor Tiff Macklem said a recent surge in
long-term bond yields is not a substitute for monetary policy
and the bank would be weighing whether to let previous rate
hikes work through the economy or raise again to counter sticky
inflation.

Money markets see a 36% chance of a rate hike at the central
bank’s next policy decision on Oct. 25, up from 27% before
Macklem spoke.

“I think they would probably prefer to stay sidelined,” said
Sahota. “It’s going to take a little push higher in inflation
for the Bank of Canada to really escalate the potential of
another rate hike.”

Canadian consumer price index data for September is due on
Wednesday. Economists expect the annual rate of inflation to
hold steady at 4%.

The Canadian 2-year yield rose 3.2 basis points
to 4.865%, while the gap between it and the equivalent U.S. rate
narrowed by 4.9 basis points to roughly 19 basis points in favor
of the U.S. note.
(Reporting by Fergal Smith; editing by Jonathan Oatis)