May 27, 2019 / 8:54 PM / 22 days ago

Canadian dollar sticks to narrow range in 'calm before the storm'

TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Monday, trading in a narrow range due to lighter than usual liquidity conditions and ahead of a Bank of Canada interest rate decision later in the week.

U.S. and Canada Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

At 4:08 p.m. (2008 GMT), the Canadian dollar was nearly unchanged at 1.3440 to the greenback, or 74.40 U.S. cents. The currency, which gained 0.2% last week, traded between 1.3430 and 1.3453.

The narrow range came in subdued trading because of market holidays in London and New York.

“There is not a lot of liquidity out there to see any activity,” said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets. “It’s potentially the calm before the storm because Canada has a very important and impactful calendar this week.”

The Bank of Canada is widely expected to leave its benchmark interest rate unchanged on Wednesday at 1.75% as it weighs developments in household spending, oil markets and global trade policy.

The central bank, which has kept the rate on hold since October after having tightened by 125 basis points since July 2017, has projected that the economy barely grew in the first three months of the year. Canada’s first quarter gross domestic product data is due on Friday.

Canada took a first step toward ratifying the new North American trade agreement three days ahead of U.S. Vice President Mike Pence’s trip to Ottawa to discuss passage of the treaty. Canada sends about 75% of its exports to the United States, including oil.

Oil prices were boosted on Monday by Middle East tensions and OPEC-led supply cuts as well as continued crude disruptions from Russia after a contamination problem discovered last month. U.S. crude oil futures were up 1% at $59.24 a barrel.

Speculators have cut their bearish bets on the Canadian dollar to the lowest since March, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of May 21, net short positions had fallen to 42,236 contracts from 47,588 in the prior week.

Canadian government bond prices were higher across a flatter yield curve. The 10-year rose 19 Canadian cents to yield 1.594%, its lowest yield since March 29.

Reporting by Fergal Smith; Editing by Andrea Ricci and Sonya Hepinstall

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