TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Monday as oil prices rose, but gains for the loonie were restrained ahead of a Bank of Canada interest rate decision this week.
U.S. crude CLc1 prices were up 0.93 percent to $54.49 a barrel as investors showed confidence in prices rising further, though gains were capped by the prospect of faster growth in U.S. oil production. [O/R]
Oil is one of Canada’s major exports.
The Bank of Canada is widely expected to hold interest rates at 0.50 percent on Wednesday.
In January, its governor, Stephen Poloz, said that an interest rate cut remains on the table depending on risks, including “material consequences” if U.S. President Donald Trump enacts protectionist policies.
Trump’s address to Congress is due on Tuesday. He is expected to unveil some elements of his plans to cut taxes.
A border adjustment tax is part of a tax reform blueprint proposed by House Republicans. The loonie would be among the biggest losers if it is implemented, analysts say.
At 9:28 a.m. ET (1428 GMT), the Canadian dollar CAD=D4 was trading at C$1.3088 to the greenback, or 76.41 U.S. cents, slightly stronger than Friday’s close of C$1.3101, or 76.33 U.S. cents.
The currency’s strongest level of the session was C$1.3085, while its weakest level was C$1.3123.
On Friday, the loonie notched a one-week high at C$1.3057 after data showed a spike in domestic inflation.
Speculators increased bullish bets on the Canadian dollar to the most since May, data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian dollar net long positions rose to 24,584 contracts as of Feb. 21 from 19,340 a week earlier.
Canadian government bond prices were slightly lower across the yield curve in sympathy with U.S. Treasuries, with the two-year CA2YT=RR price down 0.5 Canadian cent to yield 0.749 percent and the benchmark 10-year CA10YT=RR falling 8 Canadian cents to yield 1.616 percent.
On Friday, the 10-year yield touched its lowest in more than two months at 1.599 percent.
Reporting by Fergal Smith Editing by W Simon