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Loonie touches a three-month low at 1.3883

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Bond yields edge lower across the curve

By Fergal Smith

TORONTO, Aug 20 (Reuters) - The Canadian dollar steadied

against its U.S. counterpart on Wednesday, with the currency

holding near an earlier three-month low after it was pressured

the previous day by inflation data that raised expectations the

Bank of Canada would resume its easing campaign.

The loonie was trading nearly unchanged at 1.3865 per

U.S. dollar, or 72.12 U.S. cents, after earlier touching its

weakest intraday level since May 22 at 1.3883 as USD-CAD briefly

eclipsed the August 1 peak at about 1.3880.

"Today is obviously fairly quiet. People are kind of pausing

and saying 'did yesterday mean anything?', because it was a

decent move up in USD-CAD yesterday," said Aaron Hurd, senior

portfolio manager in the currency group at State Street Global

Advisors.

"More technically oriented traders are waiting to see if it

breaks above that resistance level in USD-CAD at 1.3880, and

then we could track up to 1.40."

Canadian data on Tuesday showed a sharp deceleration in

3-month annualized measures of underlying inflation that are

closely watched by the Bank of Canada, which led to investors

raising bets on the central bank cutting interest rates over the

coming months.

Chances of a rate cut by October have climbed to roughly 70%

from 56% before the data. The BoC has been on hold since

lowering its benchmark rate to 2.75% in March.

The U.S. dollar edged lower against a basket of major

currencies as minutes from last month's Federal Reserve policy

meeting showed that "almost all" officials preferred leaving

rates unchanged. Chair Jerome Powell is expected to speak on

Friday at the annual Jackson Hole economic symposium in Wyoming.

Canadian bond yields edged lower across the curve, with the

10-year down 1.3 basis points at 3.442%.