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Loonie touches its strongest since Nov. 16 at 1.3290
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Price of U.S. oil edges up 0.1%
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Canadian bond yields ease across curve
By Fergal Smith TORONTO, Feb 1 (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Wednesday, with the currency holding near its strongest level in 2-1/2 months as U.S. bond yields eased ahead of a Federal Reserve interest rate decision. The Canadian dollar was trading nearly unchanged at 1.3304 to the greenback, or 75.17 U.S. cents, after touching its strongest since Nov. 16 at 1.3290.
"A further moderation in U.S. yields and a continuation in the global equity rally in European cash markets has seen the loonie consolidate near a two-month high ahead of this afternoon's Fed decision," said Simon Harvey, head of FX analysis for Monex Europe and Monex Canada. The U.S. 10-year yield, a benchmark for global borrowing costs, fell 6.3 basis points to 3.466% and the U.S. dollar lost ground against a basket of major currencies. The Fed is expected to raise its target interest rate by a quarter of a percentage point, setting aside the rapid hikes used last year to curb a surge in inflation in favor of a more stepwise hunt for a stopping point. Its policy statement is due for release at 2 p.m. ET (1900 GMT).
Still, the loonie could be vulnerable to a pullback, according to Harvey, adding that "traders have positioned" for a dovish tone from Fed Chair Jerome Powell following data on Tuesday showing U.S. labor costs increasing at their slowest pace in a year. The price of oil, one of Canada's major exports, was up 0.1% at $78.96 a barrel as the market looked towards a meeting of OPEC and its allies. Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year eased 3.8 basis points to 2.880%. (Reporting by Fergal Smith; editing by Jonathan Oatis)
