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Canadian dollar weakens 0.1% against the greenback
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For the month, it was on track to gain 1.1%
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Canadian economy likely grows 1.6% in fourth quarter
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Canada-U.S. 10-year spread narrows by 5.8 basis points
TORONTO, Jan 31 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Tuesday but was on course for a monthly gain as preliminary data showed the economy growing at a slightly faster pace than the Bank of Canada expected in the fourth quarter. The loonie was down 0.1% at 1.34 to the greenback, or 74.63 U.S. cents, after trading in a range of 1.3378 to 1.3471. For the month, it was on track to advance 1.1% as signs of easing inflation bolstered risk appetite. The Canadian economy grew 0.1% in November, matching forecasts, while a preliminary estimate showed a flat reading for December and annualized gross domestic product in the fourth quarter was likely up 1.6%, above the BoC's forecast of 1.3%. Last Wednesday, the central bank signaled a pause in its tightening campaign to assess how effective interest rate hikes had been in dampening excess demand. The central bank has raised its benchmark rate to a 15-year high of 4.5%. Wall Street's main indexes rose on Tuesday as data showed U.S. labor costs increasing at their slowest pace in a year in the fourth quarter, offering a boost to the Federal Reserve in its fight against inflation. The Fed is due to make an interest rate decision on Wednesday. The price of oil, one of Canada's major exports, clawed back its earlier decline. U.S. crude prices were up 0.5% at $78.27 a barrel. Canadian government bond yields edged higher across the curve. The 10-year was up 1.2 basis points at 2.924%, while the gap compared to the equivalent U.S. rate narrowed by 5.8 basis points to about 58 basis points in favor of the U.S. bond. (Reporting by Fergal Smith Editing by Alistair Bell)
