CANADA FX DEBT-Canadian dollar steadies as downbeat BoC surveys support rate-cut bets

By Fergal Smith

TORONTO, Oct 20 (Reuters) - The Canadian dollar steadied near a six-month low against its U.S. counterpart on Monday as oil prices fell and after the Bank of Canada's quarterly business and consumer surveys supported expectations for another interest rate cut this month.

The loonie CAD= was trading nearly unchanged at 1.4025 per U.S. dollar, or 71.30 U.S. cents, after moving in a range of 1.4006 to 1.4051. Last Tuesday, the currency hit its weakest level since April 10 at 1.4079.

Canadian firms feel conditions are slightly better than earlier in the year, but they are unlikely to boost investments or hiring given the dampening effect of U.S. tariffs, a Bank of Canada survey for the third quarter showed. The business outlook indicator, a summary of business activity, prices and costs, and capacity, rose to -2.28 from -2.40 in the previous quarter.

"The Bank of Canada's business and consumer surveys continued to paint a downbeat picture of the economy, with only marginal improvement in some indicators relative to the prior quarter," Andrew Grantham, senior economist at CIBC Capital Markets, said in a note.

"And with the surveys also suggesting that inflation expectations are relatively well contained, today's data provides further support for another 25-bp (basis point) rate cut from the Bank of Canada next week."

Canada's consumer price index report for September, due on Tuesday, could offer further clues on rate-cut prospects. Economists expect inflation to rise to an annual rate of 2.3% from 1.9% in August.

Investors see a 77% chance that the BoC will ease rates at its October 29 policy decision, swap market data showed 0#CADIRPR. Last month, the central bank lowered its benchmark rate to a three-year low of 2.50%.

The price of oil, one of Canada's major exports, was trading 1% lower at $56.97 a barrel on worries about a supply glut.

Canadian bond yields moved lower across the curve. The 10-year CA10YT=RR was down 4.5 basis points at 3.056%, its lowest level since April 8.