Canadian dollar rises with oil but set for big monthly decline

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

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Tuesday as oil prices rose and domestic data showed the economy grew in January, but the loonie was on track for its biggest monthly decline in more than five years.

U.S. crude oil futures CLc1 were up 2.4% at $20.58 a barrel on Tuesday after U.S. President Donald Trump and Russian counterpart Vladimir Putin agreed to talks on stabilizing energy markets.

Canada’s economy gained 0.1% in January, driven largely by higher manufacturing, Statistics Canada data showed.

Still, Canada's economy could be hit particularly hard over the coming months by the coronavirus outbreak. Household debt is at record levels and the price of oil CLc1, one of the country's major exports, has collapsed since January.

In an effort to support the economy, the Bank of Canada has slashed interest rates in a series of emergency moves this month, to 0.25%. It is likely to buy about C$200 billion of government debt after announcing its first quantitative easing program, bond strategists estimate.

At 11:47 a.m. (1547 GMT), the Canadian dollar CAD=D4 was trading 0.3% higher at 1.4119 to the greenback, or 70.83 U.S. cents. The loonie traded in a range of 1.4095 to 1.4350.

For the month, the loonie was down 5.1%, its biggest decline since January 2015.

The U.S. dollar .DXY gave up its earlier gains after initially being supported by quarterly and fiscal year-end demand from portfolio managers and Japanese firms.

Canadian government bond yields fell across a flatter yield curve. The 10-year CA10YT=RR was down 7 basis points at 0.699%.

Reporting by Fergal Smith; Editing by Nick Zieminski