TORONTO, Sept 13 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday as investors raised bets on an oversized interest rate cut from the Federal Reserve, a move which could raise speculation about the Bank of Canada easing in larger steps.
The loonie was trading 0.1% lower at 1.3595 per U.S. dollar, or 73.56 U.S. cents, not far off the three-week low it touched on Wednesday at 1.3622. For the week, it was down 0.2%.
The U.S. dollar (.DXY), fell against a basket of major currencies after media reports fueled the debate about the Fed beginning its interest-rate-cutting campaign with a half-percentage-point reduction, rather than a quarter-point move.
"A half-point cut will weigh on the USD broadly but may also stoke expectations that the BoC could up the pace of easing, even if it is unlikely to at this stage," Shaun Osborne, chief currency strategist at Scotiabank, said in a note.
The Canadian central bank has cut three times since June, moving in quarter-point increments. Its benchmark rate is at 4.25%.
Canadian consumer price index data for August, due on Tuesday, could also guide expectations for the pace of BoC rate cuts. Analysts forecast inflation slowing to an annual rate of 2.1% from 2.5% in July.
Friday's domestic data was more upbeat than expected. It showed wholesale trade growing by 0.4% in July from June, compared with forecasts for a 1.1% decline.
Canadian bond yields eased across the curve, tracking moves in U.S. Treasuries. The 2-year was down 5.2 basis points at 2.950%, trading at its lowest level since August 2022.
Reporting by Fergal Smith; Editing by Leslie Adler
