CANADA FX DEBT-C$ dips as investors guard against 'dovish surprise' from BoC

 (Adds strategist quote and details throughout, updates prices)
    * Canadian dollar weakens 0.1% against greenback
    * Loonie trades in a range of 1.2351 to 1.2396
    * Price of U.S. oil settles 1.1% higher
    * Canadian 10-year yield eases 2.2 basis points

    By Fergal Smith
    TORONTO, Oct 26 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Tuesday as the risk that the
Bank of Canada would temper investor expectations for earlier
interest rate hikes offset higher oil prices.
    The BoC could become the first central bank from a G7
country to end stimulus from its pandemic-era bond-buying
program at an interest rate announcement on Wednesday.
            
    The central bank has pledged to keep rates at a record low
0.25% until economic slack is absorbed, which would happen in
the second half of 2022 in its latest forecast. But money
markets have moved in recent weeks to price in a hike by April.
          
    "For the Bank of Canada, there is a chance you see a dovish
surprise and if that happens you could see some short-term
Canadian dollar weakness," said Edward Moya, a senior market
analyst at OANDA in New York.
    The Canadian dollar        was trading 0.1% lower at 1.2388
to the greenback, or 80.72 U.S. cents, having traded in a range
of 1.2351 to 1.2396. Last Thursday, it touched its strongest
level in nearly four months at 1.2287.           
    The price of oil, one of Canada's major exports, was
supported by a global supply shortage and strong demand in the
United States, the world's biggest consumer. U.S. crude oil
futures        settled up 1.1% at $84.65 a barrel, its highest
level since 2014.      
     Canadian Prime Minister Justin Trudeau sparked concern in
the country's oil patch and hope among green advocates when he
named two men with strong environmental records to lead his
government's fight against climate change.             
    Canadian government bond yields were mixed across a flatter
curve. The 10-year yield             eased 2.2 basis points to
1.631%, after touching on Friday its highest level since January
of 2020 at 1.713%.

 (Reporting by Fergal Smith
Editing by Paul Simao and Marguerita Choy)