TORONTO, Feb 14 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as financial markets steadied and investors weighed the likely timing of interest rate cuts by the Bank of Canada and the Federal Reserve.
The loonie was trading 0.1% higher at 1.3545 to the U.S. dollar, or 73.83 U.S. cents, after touching on Tuesday its weakest intraday level since Dec. 13 at 1.3586.
Wall Street rebounded after it was battered the day before by worries about hotter-than-expected U.S. inflation data and the U.S. dollar (.DXY), opens new tab gave back some recent gains against a basket of major currencies.
The Canadian dollar has settled down after Tuesday's sell-off, said Amo Sahota, director at Klarity FX in San Francisco.
"We don't think we get a major breakdown for the loonie unless there is a dramatic shift in rate expectation timing for the two central banks," Sahota said.
Money markets see a roughly 60% chance that the Bank of Canada will begin cutting interest rates in June, while they are fully pricing in an easing by then from the Federal Reserve.
BoC Deputy Governor Toni Gravelle will discuss normalization of the central bank's balance sheet in a speech on March 21, the CFA Society of Toronto said in a post on its website, raising speculation by some analysts that the BoC could soon end its quantitative tightening program.
The price of oil, one of Canada's major exports, was trading 1.2% lower at $76.97 a barrel as surging U.S. crude inventories pushed down prices, outweighing support from OPEC's forecast for robust demand growth.
Canadian government bond yields eased across the curve, tracking moves in U.S. Treasuries. The 10-year yield was down 9.7 basis points at 3.554% after touching on Tuesday its highest intraday level in 2-1/2 months at 3.695%.
Reporting by Fergal Smith; editing by Jonathan Oatis
