C$ recovers ahead of Poloz after hitting nearly two-week low

TORONTO (Reuters) - The Canadian dollar weakened on Tuesday to a nearly two-week low against its U.S. counterpart before recovering most of its losses as investors braced for a speech by Bank of Canada Governor Stephen Poloz.

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

In a news conference after the speech, reporters are likely to ask Poloz about the Canadian economy’s better-than-expected performance recently. But tame inflation data on Friday indicated little pressure for a rate hike.

As recently as January, the central bank said an interest rate cut remained on the table. It last lowered in July 2015 to leave its policy rate at 0.50 percent.

The central bank will release Poloz’s prepared remarks at 9:50 a.m. EDT (1350 GMT), and the governor will hold the news conference around 11:10 a.m. EDT.

The weaker bias for the loonie came even as prices rose for oil, one of Canada’s major exports.

U.S. crude CLc1 was up 1.01 percent at $48.21 a barrel, helped by supply disruption in Libya and the latest comments from officials suggesting the Organization of Petroleum Exporting Countries could extend its deal to cut global production.

At 9:14 a.m. ET (1314 GMT), the Canadian dollar CAD=D4 was trading at C$1.3378 to the greenback, or 74.75 U.S. cents, slightly weaker than Monday's close of C$1.3376, or 74.76 U.S. cents.

The currency’s strongest level of the session was C$1.3374, while it touched its weakest since March 15 at C$1.3415.

The U.S. dollar .DXY steadied against a basket of major currencies after its worst week since U.S. President Donald Trump's election in November, helped by promises of more interest rate increases by the Federal Reserve this year.

Canadian government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 2 Canadian cents to yield 0.719 percent, its lowest since Feb. 8, and the 10-year CA10YT=RR rising 25 Canadian cents to yield 1.576 percent.

The 10-year yield fell 1.5 basis points further below its U.S. equivalent to a spread of -78.4 basis points as Canadian bonds outperformed.

Reporting by Fergal Smith; Editing by Lisa Von Ahn