CANADA FX DEBT-C$ steadies as potential for U.S. policy gridlock caps gains

* Canadian dollar touches a two-week high at 1.3095

* Canada’s exports and imports rise in September

* Price of U.S. oil settles nearly 4% higher

* Canadian bond yields slide across a flatter curve

TORONTO, Nov 4 (Reuters) – The Canadian dollar was little changed against its U.S. counterpart on Wednesday after a tight U.S. election that could reduce prospects of a large economic stimulus package, with the currency steadying after it notched an earlier two-week high.

Wall Street’s main indexes surged as investors bet that an excruciatingly close race for the White House could end with a gridlock in Congress.

“We are going to have a divided government in terms of the Senate still looking like it is going to be held by the Republicans,” said Bipan Rai, North America head, FX strategy at CIBC Capital Markets. “That is going to make the path toward additional stimulus a little bit more difficult.”

A large U.S. coronavirus relief package would bolster prospects for Canada’s commodity-linked currency, FX strategists said in a Reuters poll.

The price of oil, one of Canada’s major exports, settled nearly 4% higher at $39.15 a barrel, while the Canadian dollar was trading about unchanged at 1.3125 to the greenback, or 76.19 U.S. cents.

Earlier, the currency touched its strongest level since Oct. 21 at 1.3095.

Canada’s exports rose by 1.5% in September, while imports matched that gain, data from Statistics Canada showed. Both remain below pre-pandemic levels,

“Trade flow continued to rebuild as the North American and global economy improved through September,” said Ryan Brecht, a senior economist at Action Economics.

Canada’s jobs report for October is due on Friday, which could offer further clues on the strength of economic recovery.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 6.9 basis points to 0.622%, pulling back from Tuesday’s two-month intraday high at 0.694%. (Reporting by Fergal Smith; Editing by Andrea Ricci and Diane Craft)