TORONTO: The Canadian dollar edged higher against its US counterpart on Tuesday, but stuck to a narrow range as oil prices fell and investors hunkered down ahead of the outcome of the Federal Reserve's two-day monetary policy meeting.

The loonie was trading 0.1% higher at 1.2460 to the greenback, or 80.26 US cents, having traded in a range of 1.2454 to 1.2500. On Monday, it touched a three-year high at 1.2439.

"There is a big event risk on the horizon and it doesn't look like markets are really happy to price in some big positions prior to it," said Simon Harvey, senior FX market analyst for Monex Europe and Monex Canada.

Fed policymakers are expected on Wednesday to forecast that the US economy will grow in 2021 at the fastest rate in decades as the COVID-19 vaccination campaign gathers pace and a $1.9 trillion relief package washes through to households.

Canada sends about 75% of its exports to the United States, including oil. US crude oil futures fell 1.7% to $64.29 a barrel as a recovery in demand was threatened by rising US inventories and moves by some European states to suspend the use of a major vaccine.

Foreign investors bought a net C$1.3 billion in Canadian securities in January, led by provincial government bonds, Statistics Canada said.

Canada's inflation report for February is due on Wednesday which could help guide expectations for the Bank of Canada policy outlook.

The central bank is likely to reduce its bond purchases as soon as next month, strategists say, which would provide the clearest signal yet that Canada's economy requires less help to emerge from the coronavirus crisis.

Canada's 10-year was up less than half a basis point at 1.546%, having pulled back from a 14-month high intraday on Monday at 1.602%.