C$ dips as short-covering propels greenback broadly higher

TORONTO: The Canadian dollar edged lower against its US counterpart on Monday but fared better than most other G10 currencies as the United States moved closer to passing fiscal stimulus and ahead of an interest rate decision by the Bank of Canada on Wednesday.

The loonie was trading 0.1% lower at 1.2666 to the greenback, or 78.95 US cents.

"We have seen some modest defensiveness with respect to the loonie," said Bipan Rai, North America head, FX strategy at CIBC Capital Markets. "It just feels like the market is closing up shorts in US dollars."

The safe-haven US dollar notched a 3-1/2-month high against a basket of major currencies as elevated US Treasury yields spooked investors.

Pressure on the loonie was less than on some other currencies because Canadian yields have been keeping pace with the recent move higher in US yields and oil has climbed, Rai said.

Besides the greenback, the only other G10 currency to gain ground against the Canadian dollar on Monday was the Norwegian crown .

The US Senate on Saturday passed the stimulus package, and President Joe Biden said he hoped for quick passage of the revised bill by the House of Representatives.

Canada sends about 75% of its exports to the United States, including oil.

Oil settled 1.6% lower at $65.05, giving back some recent gains, after Saudi Arabia said there were was no loss of property following attacks on its oil facilities.

Canada's 10-year yield touched its highest since January last year at 1.545% before dipping to 1.521%, up 1.9 basis points on the day.