Canadian dollar dips as attention turns to BoC rate decision

TORONTO: The Canadian dollar edged lower against its US counterpart on Monday as oil prices slipped and investors awaited a Bank of Canada interest rate decision later in the week, with the currency trading in a narrow range.

The Bank of Canada is widely expected to leave its benchmark interest rate on hold at a record low of 0.25% on Wednesday.

It could dial back some of the optimism it showed at the last policy announcement in April in response to lengthy domestic lockdowns and a weaker-than-expected rebound in the US labor market, Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, said in a note.

"A more cautious tone from the BoC" is likely, Reitzes said.

In April, the central bank signaled it could start raising its key interest rate from a record low of 0.25% in late 2022 and tapered its bond purchases.

The price of oil, one of Canada's major exports, eased after touching its highest level since October 2018 at $70 a barrel, pressured by the prospect of higher Iranian exports.

US crude prices fell 0.2% to $69.50, while the Canadian dollar was trading 0.1% lower at 1.2091 to the greenback, or 82.71 US cents.

The currency, which last Tuesday touched its strongest level in six years at 1.2007, traded in a range of 1.2065 to 1.2106.

Speculators have raised their bullish bets on the Canadian dollar to the highest level since November 2019, data from the US Commodity Futures Trading Commission showed on Friday. As of June 1, net long positions had increased to 48,772 contracts from 44,811 in the prior week.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up 1.4 basis points at 1.470%. On Friday, it touched its lowest since May 26 at 1.456%.