TORONTO: The Canadian dollar weakened against the greenback on Tuesday to its lowest level in nearly a week, hurt by broad strength in its US counterpart, while investors looked ahead to a monetary policy statement from the Bank of Canada due on Wednesday.
The decline saw the loonie unwind some of last week's rally and took it through the closely watched C$1.09 level. The Canadian dollar rose 0.6 percent last week, lifted by a number of factors including fund flow speculation and month-end positioning.
"Given the swings we had last week, we're just hoping for a little bit of calm in the markets today to regroup and regather," said Shaun Osborne, chief currency strategist at TD Securities in Toronto.
Weaker oil prices also weighed on the loonie, even though the correlation between the currency and commodities is not strong at the moment, Osborne said.
"We're essentially just range trading and consolidating at the moment," he said.
The Canadian dollar ended the North American session at C$1.0930 to the greenback, or 91.49 US cents, compared to Friday's official close of C$1.0873, or 91.97 US cents from the Bank of Canada.
Many market participants were away on Monday for the Labor Day holiday.
While Canada's central bank is widely expected on Wednesday to hold its overnight interest rate at 1 percent, where it has been since 2010, investors will be parsing the tone of the policy statement.
The central bank is expected to stick to a cautious message.
"We're very likely to get another balanced statement" that will temper an improvement in US growth with expectations Canadian inflation will drift lower, said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.
"They'll be able to remain accommodative until growth really picks up on a sustainable basis," he said.
Canada's jobs report for August will be the other main domestic economic event this week. Forecasts are for the pace of jobs growth to remain sluggish with 10,000 positions created last month.
The report could get additional scrutiny coming on the heels of the July report, which had to be restated by Statistics Canada due to an error.
Canadian government bond prices were lower across the maturity curve on Tuesday, with the two-year down 3-1/2 Canadian cents to yield 1.125 percent and the benchmark 10-year down 85 Canadian cents to yield 2.092 percent.
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