TORONTO, Oct 29 (Reuters) - The Canadian dollar gave back its earlier gains against the greenback on Wednesday, as the Federal Reserve stopped short of signaling a December rate cut in a move that offset an earlier shift to more hawkish guidance by the Bank of Canada.
The loonie was trading nearly unchanged at 1.3945 per U.S. dollar, or 71.71 U.S. cents, after touching its strongest level since September 30 at 1.3889.
The Bank of Canada reduced its benchmark interest rate by 25 basis points to 2.25%, as expected, and said the rate is at about the right level to keep inflation close to target while helping the economy through a period of structural adjustment due to the U.S.-led trade war.
"Whilst Governor Macklem and Co. left the door open for further easing if necessary, the Bank’s guidance steers away from that scenario as a base case," Nick Rees, head of macro research at Monex Europe Ltd, said in a note. "The result is a somewhat more hawkish outcome than many had expected, with the loonie bouncing higher as a consequence."
Investors see little chance of another rate cut this year and are leaning against a move in 2026.
A divided Federal Reserve cut interest rates by a quarter of a percentage point to a range of 3.75%-4.00%. Speaking at a press conference, Fed Chair Jerome Powell said that a further reduction in the policy rate at the December meeting is not a foregone conclusion, boosting the U.S. dollar (.DXY), opens new tab against a basket of major currencies.
The price of oil , one of Canada's major exports, settled 0.55% higher at $60.48 a barrel after data showed U.S. crude and fuel inventories drew down more than expected last week.
Canadian bond yields moved higher across the curve. The 10-year yield was up 11.1 basis points at 3.154%, its highest level since October 14.
Reporting by Fergal Smith; editing by Mark Heinrich and Diane Craft
