OTTAWA: The Canadian dollar was little changed against the greenback on Monday as investors were wary of taking aggressive bets ahead of a US Federal Reserve decision and major domestic economic data later in the week.
Despite US crude prices that hit a six-year low on Monday on heightening concerns that the United States may run out of oil storage, the loonie managed to hold its ground, gaining support from profit-taking in the US dollar. US oil futures settled at $43.88 a barrel.
"Oil has had a pretty impressive decline and we really have not had an equal amount of Canadian dollar weakness today," said Amo Sahota, director at Klarity FX in San Francisco.
"The big event this week is the US federal Reserve and the market is just paring back some of the US dollar gains it's been enjoying and trying to shift a little bit to the sidelines ahead of that meeting. That's really the saving grace for a lot of currencies today."
The Canadian dollar ended the session at C$1.2780 to the US dollar, or 78.25 US cents, just moderately stronger than Friday's close of C$1.2790, or 78.19 US cents.
The Fed dominates a busy week for central banks around the world. Investors are focused on whether the Federal Reserve, in its policy announcement on Wednesday, will drop its pledge to be "patient" in considering interest rate increases.
"If the Fed does remove the 'patient' language at Wednesday's meeting, it'll increase the probability that the first rate hike is June," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.
"Essentially, we'll see further upward pressure on US dollar-Canadian dollar, and I don't think the C$1.28 handle will be able to hold for too long."
Klarity FX's Sahota added that the continuing decline in crude prices will also make it very difficult for USD/CAD to remain below that level.
Markets will also be digesting a full economic calendar at home, culminating in February inflation and January retail sales reports on Friday.
Canadian government bond prices were higher across the maturity curve, with the two-year up 2.5 Canadian cents to yield 0.539 percent. The benchmark 10-year was up 38 Canadian cents to yield 1.436 percent.
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