CANADA FX DEBT-Canadian dollar gains as investors weigh BoJ policy shift

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Canadian dollar strengthens 0.4% against the greenback

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Touches its strongest since last Thursday at 1.3581

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Canadian retail sales increase by 1.4% in October

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Canadian bond yields rise across steeper curve

TORONTO, Dec 20 (Reuters) – The Canadian dollar strengthened against its US counterpart on Tuesday as financial markets gyrated following a move by the Bank of Japan to tweak its monetary policy and data showed Canadian retail sales rising close to expectations in October.

The loonie was trading 0.4% higher at 1.3590 to the greenback, or 73.53 US cents, after touching its strongest since last Thursday at 1.3581.

Canadian retail sales grew by 1.4% in October from September, nearly matching analyst estimates of a 1.5% increase, data from Statistics Canada showed.

Higher sales at gasoline stations, as well as food and beverage stores helped boost the headline number but volumes were less robust, posting a flat reading for the month, and a preliminary estimate showed sales falling 0.5% in November.

Canada’s consumer price index report for November, due on Wednesday, could offer further clues on the strength of the domestic economy and guide expectations for another interest rate hike by the Bank of Canada at its policy decision on Jan. 25.

Analysts expect inflation to ease to an annual rate of 6.7% from 6.9% in October.

The price of oil, one of Canada’s major exports, was up 1.1% at $76.05 a barrel, helped by US plans to restock petroleum reserves, while the US dollar fell against a basket of major currencies.

Losses for the greenback came as the BoJ widened the allowable band for long-term yields around its 0% target, boosting the yen and sending yields on Japanese government bonds sharply higher.

Canadian yields rose across a steeper curve, tracking the move in JGBs and other core sovereign bond markets. The 10-year was up 9.6 basis points at 2.992%. (Reporting by Fergal Smith)

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