TORONTO: The Canadian dollar weakened modestly against the greenback on Monday, pressured by a decline in oil prices and as investors were wary of taking aggressive bets ahead of a meeting of Federal Reserve policymakers later in the week.
Analysts said that the loonie is likely to trade in a tight range until the Fed's policy announcement at the conclusion of its two-day meeting on Wednesday. The currency is also consolidating from the more than five-year low it hit this month.
While the Fed is expected to announce the end of its bond-purchase program, the US central bank will likely reinforce its willingness to wait a while before raising interest rates.
"Despite the worries about global growth that we saw the last few weeks, I don't think there's a lot of impetus for the Fed to push back the end of QE," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary, referring to the nickname for quantitative easing.
"The communication will continue to be on the dovish side of expectations, so I think they'll continue to have language in there about interest rates being low for a considerable amount of time in the future," said Smith.
The Canadian dollar ended the North American session at C$1.1238, or 88.98 US cents, slightly weaker than Friday's close of C$1.1233 to the US dollar, or 89.02 US cents.
Smith expects the currency will trade between C$1.1200 and the high C$1.12s until Wednesday.
Oil prices recovered much of their earlier losses but US crude still settled down 1 cent at $81.00 a barrel after Goldman Sachs slashed its 2015 oil price forecasts.
At home, traders are looking ahead to testimony by Bank of Canada Governor Stephen Poloz to the Senate banking committee on Wednesday. His testimony had been scheduled for last week but was canceled due to a gunman's attack on Parliament Hill.
Canadian government bond prices were mixed, with the two-year up half a Canadian cent to yield 1 percent. The benchmark 10-year was unchanged and yielded 2.016 percent.
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