TORONTO, Oct 19 (Reuters) - The Canadian dollar held on to much of its gains against the US dollar on Monday as hawkish comments by Bank of Canada Governor Tiff Macklem overshadowed domestic inflation data, while investors awaited the outcome of a referendum in Alberta.
The loonie was trading 0.3% higher at 1.4095 per US dollar, or 70.95 US cents, after touching its strongest intraday level since September 23 at 1.4071.
The Bank of Canada expects to raise its quarterly inflation forecast significantly this month owing to persistently high crude oil and petroleum product prices, Macklem said on Saturday.
Higher energy prices due to the Middle East conflict have raised inflation pressures globally. US crude oil futures were trading 1.7% higher at $103.09 a barrel.
"I think central bankers around the world are just seeing the demand from AI and no finish line in the Iran war and starting to think they have to do something," said Adam Button, chief currency analyst at investingLive.
Swap market data showed that investors see a roughly 80% chance the BoC hikes interest rates at a policy decision on October 28, up from 30% on Friday.
The central bank has left its benchmark rate on hold at 2.25% since last October.
Canada's annual inflation rate rose to 3.1% in September from 3% in August. That was below the 3.2% rate that analysts had forecast but a BoC survey on consumer expectations showed that expectations for inflation over the next five years had risen.
Oil-rich Alberta holds a nonbinding referendum on Monday on whether the western province should secede from Canada. Polls have consistently shown that a majority of Alberta voters oppose separation.
"The currency market would love to see an emphatic rejection of separation by voters," Button said.
Canadian bond yields moved higher across the curve, with the 10-year up 11.1 basis points at 3.940%.
The gap between the 10-year and the equivalent US rate narrowed by 6.3 basis points to about 121 basis points in favor of the US note.
Reporting by Fergal Smith; Editing by Hugh Lawson
