CANADA FX DEBT-Canadian dollar rebounds as Fed leadership speculation hits greenback

By Fergal Smith

TORONTO, July 16 (Reuters) - The Canadian dollar recovered on Wednesday from a near three-week low as media reports that U.S. President Donald Trump could soon fire Federal Reserve Chair Jerome Powell triggered a selloff for the greenback.

The loonie CAD= was trading 0.2% higher at 1.37 per U.S. dollar, or 72.99 U.S. cents, after touching its weakest intraday level since June 27 at 1.3755.

"It is really a U.S.-driven market right now," said Kyle Chapman, forex markets analyst at Ballinger & Co in London. "The three-week high (for USD-CAD) might be short-lived if Trump really does consider sacking Powell, though CAD would probably benefit less than its peers owing to its closer proximity to the U.S."

The U.S. dollar .DXY tumbled against a basket of major currencies in volatile trading on reports that Trump is looking to fire Powell, though the greenback recouped some losses when Trump said he was not planning to do so.

Fed officials have resisted cutting interest rates until there is clarity on whether Trump's tariffs on U.S. trading partners reignite inflation. Data on Tuesday showed an uptick in U.S. consumer prices which had helped underpin the greenback.

Canadian consumer price data released on Tuesday showed underlying increases remaining close to an annual rate of 3%, well above the Bank of Canada's 2% target.

Investors have largely priced out chances of a BoC rate cut at the next policy decision on July 30. 0#CADIRPR

Canadian Prime Minister Mark Carney said working through issues related to softwood lumber is a top priority in ongoing trade negotiations with the U.S., but a deal that works for Canadian workers isn't yet on the table.

Canadian bond yields were mixed across a steeper curve, tracking moves in U.S. Treasuries. The 2-year CA2YT=RR fell 1.6 basis points to 2.822%, while the 30-year CA30YT=RR was up 1.4 basis points at 3.911%.