C$ sticks to recent range ahead of Bank of Canada rate decision

TORONTO: The Canadian dollar was little changed against its US counterpart on Tuesday, with the currency extending its recent sideways pattern after Monday's federal budget and ahead of a Bank of Canada interest rate decision on Wednesday.

Canadian Prime Minister Justin Trudeau's government lined up billions in new spending to provide emergency support during a virulent third wave of COVID-19 and to help launch an economic recovery ahead of an election expected later this year.

"The new spending is an upside to growth and could lead to the Bank of Canada raising rates earlier or faster than otherwise," said Adam Cole, chief currency strategist at RBC Capital Markets in London.

Canada's central bank has signaled it would leave interest rates on hold at a record low level of 0.25% until 2023. It is due to update its economic forecasts on Wednesday and could announce it is cutting bond purchases from the current pace of C$4 billion per week.

The Canadian dollar was trading nearly unchanged at 1.2530 to the greenback, or 79.81 US cents. Since the start of April it has traded in a range of 1.2467 to 1.2634.

The price of oil, one of Canada's major exports, was up 0.5%, supported by disruption to Libyan exports and expectations of a drop in US crude inventories. But rising global coronavirus cases limited gains and also weighed on global equity markets.

Canadian home prices accelerated sharply in March, data showed. The Teranet-National Bank Composite House Price Index was up 1.5% from the previous month.

Canadian government bond yields were mixed across a steeper curve. The 10-year rose 2.6 basis points to 1.581%, its highest level since March 30, after the budget document showed that Canada is raising the share of long-term debt it issues, including quarterly auctions of ultra-long bonds.