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The Canadian dollar CADUSD was little changed against its U.S. counterpart on Wednesday, giving back some earlier gains, as oil prices fell and investors bet that the Bank of Canada’s messaging will turn less hawkish in the coming months.

The Canadian central bank held its target for the overnight rate at 5 per cent, as expected, and left the door open to another hike, saying it was still concerned about inflation while acknowledging an economic slowdown and a general easing of prices.

“They may be less hawkish in the first quarter of 2024,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. “The data is pointing toward the bank being done for the cycle. There is a possibility of some cuts throughout 2024. The question is how much.”

Money markets expect the BoC to begin easing as soon as March and borrowing costs to fall by more than 100 basis points next year.

The Canadian dollar was trading nearly unchanged at 1.3585 to the greenback, or 73.61 U.S. cents, after moving in a range of 1.3550 to 1.3594.

Analysts see less upside for the currency than previously thought over the coming year as recent data showing a slowdown in the domestic economy brings forward the expected start of Bank of Canada interest rate cuts, a Reuters poll found.

Canada recorded a larger-than-expected trade surplus of C$3-billion ($2.2-billion) in October, as exports rose marginally but imports slumped.

The price of oil, one of Canada’s major exports, fell 4 per cent to $69.42 a barrel as a bigger-than-expected rise in U.S. gasoline inventories worried markets about demand.

Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries. The 10-year was down 6.1 basis points at 3.280 per cent, its lowest level since July 4.

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