CANADA FX DEBT-Canadian dollar hits 11-day low as interest rate spreads weigh

By Fergal Smith

TORONTO, Sept 23 (Reuters) - The Canadian dollar weakened to an 11-day low against its U.S. counterpart on Tuesday, as the Bank of Canada vowed to support the domestic economy and recent widening of interest rate spreads pressured the currency.

The loonie CAD= was trading 0.2% lower at 1.3840 per U.S. dollar, or 72.25 U.S. cents, after touching its weakest intraday level since September 12 at 1.3849.

"It's been a slow grind ... but we haven't materially moved out of the range that's been in place since the middle of August," said Amo Sahota, director at Klarity FX in San Francisco.

Recent widening of Canada-U.S. interest rate spreads has contributed to negative sentiment toward the loonie, Sahota added.

The Canadian 2-year yield was trading about 114 basis points below the equivalent U.S. rate, compared to a gap of 92 basis points near the end of August. Investors tend to favor the higher-yielding currency.

The Bank of Canada will support economic growth while ensuring inflation remains well controlled, Governor Tiff Macklem said, speaking less than one week after the central bank cut interest rates for the first time since March.

Investors see a roughly 50% chance the BoC will ease again at its next policy decision on October 29, overnight index swaps data showed. 0#CADIRPR

The price of oil, one of Canada's major exports, settled 1.8% higher at $63.41 a barrel after a deal to resume exports from Iraq's Kurdistan stalled.

Canadian bond yields edged lower across the curve. The 10-year CA10YT=RR was down 0.7 basis points at 3.193%.