Canadian dollar steadies ahead of Bank of Canada rate decision

TORONTO: The Canadian dollar was little changed against its US counterpart on Wednesday as data showing tame US underlying inflation bolstered investor sentiment and ahead of an interest rate decision by the Bank of Canada.

The Canadian dollar was trading little changed at 1.2639 to the greenback, or 79.12 US cents, having traded in a range of 1.2625 to 1.2683.

The central bank is widely expected to leave its policy rate at a record low of 0.25% but investors see rising chances of a hike next year as the economic outlook improves. The announcement is due at 10 a.m. ET (1500 GMT)

Conditions have improved since the last rate decision in January, Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets, said in a note.

But the central bank won't want "to sound too optimistic or it risks a further larger back up in interest rates above and beyond the sharp moves seen over the past few weeks," Reitzes said.

US stock index futures rose after the inflation data eased concerns over a rise in borrowing costs in the near term.

US President Joe Biden is poised for his first major legislative victory when the House of Representatives is expected to approve his $1.9 trillion COVID-19 relief package, which forecasters predict will turbocharge the US economy.

Canada sends about 75% of its exports to the United States, including oil. US crude prices were up 0.8% at $64.52 a barrel, supported by an OECD forecast for the global economic recovery and by OPEC+ oil output curbs.

Canadian government bond yields edged higher across the curve, with the 10-year up about half a basis point at 1.453%. On Monday, it touched its highest since January 2020 at 1.545%.