March 16, 2015 / 1:53 PM / in 3 years

Canadian dollar little changed as markets await U.S. Fed

OTTAWA (Reuters) - The Canadian dollar was little changed against the greenback on Monday as investors were wary of taking aggressive bets ahead of a U.S. Federal Reserve decision and major domestic economic data later in the week.

Despite lower oil prices on Monday, the loonie managed to hold its ground, gaining support from profit-taking in the U.S. dollar.

Investors were focused on whether the Federal Reserve, in its policy announcement on Wednesday, would drop its pledge to be “patient” in considering interest rate increases. [ID:nL6N0WG04L]

“If the Fed does remove the ‘patient’ language at Wednesday’s meeting, it’ll increase the probability that the first rate hike is June,” said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

“Essentially we’ll see further upward pressure on U.S. dollar-Canadian dollar, and I don’t think the C$1.28 handle will be able to hold for too long.”

The Canadian dollar CAD=D4 was at C$1.2778 to the greenback, or 78.26 U.S. cents, modestly stronger than Friday’s close of C$1.2790, or 78.19 U.S. cents.

Markets also face a busy economic calendar at home, culminating in February inflation and January retail sales reports on Friday.

Depending on what the Fed does, though, the data could take a backseat to the policy announcement, Smith said.

“The loonie will most likely follow the direction of oil and broader U.S. dollar movements as we move closer to Wednesday,” he said.

Canadian government bond prices were mostly higher across the maturity curve, although the two-year CA2YT=RR was down 3.8 Canadian cents to yield 0.573 percent. The benchmark 10-year CA10YT=RR was up 52 Canadian cents to yield 1.422 percent.

Editing by Lisa Von Ahn

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