TORONTO, Feb 6 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil prices rose and the Bank of Canada signaled little urgency to cut interest rates, with the currency rebounding from a near two-month low.
The loonie was trading 0.4% higher at 1.3490 to the greenback, or 74.13 U.S. cents, after earlier touching its weakest intraday level since Dec. 13 at 1.3544.
Bank of Canada Governor Tiff Macklem said more time was needed for monetary policy to ease price pressures, adding that the biggest driver of inflation - shelter costs - could not be tamed by borrowing costs. He made the remarks in the first speech he has given since the bank held rates on Jan 24.
"Governor Macklem struck a slightly hawkish tone ... noting that the final steps on the path to 2% inflation will likely be slow," Robert Both, senior macro strategist at TD Securities, said in a note.
Canadian economic activity expanded at its fastest pace in nine months in January, Ivey Purchasing Managers Index (PMI) data showed. The seasonally adjusted index edged up to 56.5 from 56.3 in December, posting its highest level since April.
Canadian jobs data, due on Friday, could provide further clues on the strength of the domestic economy.
The price of oil, one of Canada's major exports, rose on Tuesday as investors awaited the result of top U.S. diplomat Antony Blinken's efforts in the Middle East to halt the Gaza war and quell tensions in a major oil-producing region.
U.S. crude oil futures settled 0.7% higher at $73.31 a barrel, while the U.S. dollar (.DXY), opens new tab gave back some recent gains against a basket of major currencies.
Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries. The 10-year was down 6.1 basis points at 3.447%, after earlier touching its highest level since Jan. 29 at 3.519%.
Reporting by Fergal Smith, editing by David Ljunggren
