Loonie steadies as Canada posts surprise trade surplus

TORONTO: The Canadian dollar was little changed against its US counterpart on Tuesday as oil prices fell and data showed Canada's trade balance swinging to a surprise surplus in April.

Canada posted a trade surplus of C$594 million in April, as imports fell at a much faster rate than exports amid a major decrease in the trade of motor vehicles and parts, Statistics Canada said.

Analysts had predicted a deficit of C$700 million after a revised C$1.35 billion deficit in March.

The price of oil, one of Canada's major exports, was pressured by profit taking and a stronger US dollar, but overall optimism about strong demand recovery kept a floor under prices.

US crude prices fell 0.6% to $68.85 a barrel, while the Canadian dollar was trading nearly unchanged at 1.2088 to the greenback, or 82.73 US cents.

The currency traded in a tight range of 1.2071 to 1.2095, with investors awaiting a Bank of Canada interest rate decision on Wednesday. The central bank is widely expected to leave its key interest rate on hold at 0.25%.

In April, the BoC became the first among Group of Seven central banks to reduce the scope of its pandemic support. Further tapering of its asset purchase program is expected next quarter, a Reuters poll showed.

Investors were also weighing reports that Canada is preparing to ease restrictions at the US border.

Canadian government bond yields were lower across a flatter curve, tracking the move in US Treasuries. The 10-year fell to its lowest since April 15 at 1.439% before edging back up to 1.445%, down 3.2 basis points on the day.