TORONTO (Reuters) - The Canadian dollar rebounded against the U.S. dollar after a drop earlier on Monday, helped by firmer crude oil prices, as attention shifted to a busy week of data and events, including an impending Bank of Canada interest rate decision on Wednesday.
Oil prices rose as investors took positions ahead of an OPEC meeting this week, despite expectations that the producer group will not change its output policy.
Canada’s current account deficit shrank in the third quarter, but not by as much as expected, as an improvement in trade was partly offset by a higher deficit on cross-border investment flows.
The Bank of Canada is widely expected to hold interest rates at 0.50 percent and keep them on hold through 2016 when it makes its policy announcement, according to a Reuters poll.
At 9:22 a.m. EST (1422 GMT), the Canadian dollar CAD=D4 was trading at C$1.3351 to the greenback, or 74.90 U.S. cents, stronger than Friday’s official close of C$1.3372, or 74.78 U.S. cents.
The currency’s strongest level of the session was C$1.3355, while its weakest was C$1.3393, a one-week low.
Against the euro, the Canadian dollar firmed to C$1.4125 in anticipation of further policy easing measures from the European Central Bank at a meeting on Thursday.
Canadian government bond prices were lower across the maturity curve, paring recent gains, with the two-year CA2YT=RR price down 2.5 Canadian cents to yield 0.645 percent and the benchmark 10-year CA10YT=RR falling 13 Canadian cents to yield 1.581 percent.
The Canada-U.S. two-year bond spread was 0.6 basis point narrower at -28.9 basis points, while the 10-year spread was 1.6 basis points narrower at -64.3 basis points as Canadian government bonds underperformed.
U.S. crude CLc1 prices were up 1.49 percent at $42.33 a barrel, while Brent crude LCOc1 added 1.32 percent to $45.45.[O/R]
Data on Tuesday is expected to confirm that Canada’s economy pulled out of recession in the third quarter, with annualized growth forecast to ramp up to 2.3 percent.
The November employment report will be released Friday and is expected to show that jobs fell 10,000 after jumping 44,400 in October, according to a Reuters poll.
Reporting by Fergal Smith; Editing by Bernadette Baum