TORONTO (Reuters) - The Canadian dollar weakened against its broadly firmer U.S. counterpart on Monday, as the market paused after the unit last week posted its strongest gain in 18 months on signals from the Bank of Canada that higher interest rates lie ahead.
The loonie rose 1.9 percent last week, its biggest advance since the first week of 2016.
The U.S. dollar .DXY rose against a basket of major currencies, helped by comments from New York Federal Reserve President William Dudley suggesting the central bank remained on track to raise U.S. interest rates further despite recent disappointing inflation data.
At 9:47 a.m. ET (1347 GMT), the Canadian dollar CAD=D4 was trading at C$1.3227 to the greenback, or 75.60 U.S. cents, down 0.1 percent.
The currency traded in a range of C$1.3211 to C$1.3260. It touched its strongest in 3-1/2 months on Wednesday at C$1.3165.
Speculators cut bearish bets on the Canadian dollar for a third straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian dollar net short positions fell to 88,595 contracts as of June 13 from 94,501 a week earlier.
In May, net short positions reached a record high 99,109 contracts.
U.S. crude CLc1 prices were up 0.40 percent at $44.92 a barrel.
Prices of oil had come under pressure over the past month from rising production in the United States, Libya and Nigeria. Oil is one of Canada’s major exports. [O/R]
Canadian government bond prices were mixed across a flatter yield curve, with the two-year CA2YT=RR down 3.5 Canadian cents to yield 0.916 percent and the 10-year CA10YT=RR falling 5 Canadian cents to yield 1.528 percent.
The gap between the 2-year and 10-year yields narrowed by 1.4 basis points to a spread of +61.2 basis points, its smallest gap since Oct. 26, as shorter dated Canadian bonds underperformed.
Canadian wholesale trade data for April is due out on Tuesday, while inflation data for May is due on Friday. ECONCA
Reporting by Fergal Smith; Editing by Bernadette Baum