Canadian dollar notches six-week high as Bank of Canada turns less dovish

TORONTO (Reuters) - The Canadian dollar strengthened on Wednesday to a six-week high against its U.S. counterpart after the Bank of Canada turned less dovish, while comments by U.S. President Donald Trump weighed on the greenback.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

The Bank of Canada did not even consider cutting interest rates as it left monetary policy unchanged on Wednesday amid signs of strong growth, but it is too early to conclude the economic growth is sustainable, Governor Stephen Poloz said.

“They are still sitting on the fence but feeling that the numbers are coming in a little bit better,” said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management.

“We think that a rate hike may be a little bit earlier than we thought before.”

The Bank of Canada will likely maintain its wait-and-see stance on monetary policy until early next year, a Reuters poll found last week.

The U.S. dollar .DXY fell against a basket of currencies after Trump said that the greenback was "getting too strong" and would eventually hurt the U.S. economy.

The Canadian dollar CAD=D4 ended at C$1.3273 to the greenback, or 75.34 U.S. cents, stronger than Tuesday's close of C$1.3332, or 75.01 U.S. cents.

The currency’s weakest level of the session was C$1.3339, while it touched its strongest since Feb. 28 at C$1.3238.

Gains for the loonie came even as prices of oil, one of Canada’s major exports, fell after U.S. crude inventory data suggested the market was still heavily supplied. [O/R]

U.S. crude oil futures CLc1 settled 29 cents lower at $53.11 a barrel.

Canadian home prices rose in March, extending their climb in major cities in Ontario and British Columbia, according to data which was likely to add to concerns about housing affordability in some parts of the country.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR edged up 1 Canadian cent to yield 0.725 percent and the 10-year CA10YT=RR climbed 30 Canadian cents to yield 1.509 percent.

The difference in yield between Canada’s 10-year bond and its U.S. equivalent narrowed by 3.6 basis points to a spread of -73.4 basis points as U.S. Treasuries outperformed.

Additional reporting by Dan Burns; Editing by Andrea Ricci and Chizu Nomiyama