TORONTO, Oct 22 (Reuters) - The Canadian dollar strengthened slightly against its U.S. counterpart on Tuesday, as the recent move higher in U.S. bond yields lost some momentum and investors turned attention to an interest rate decision by the Bank of Canada.
The loonie was trading 0.1% higher at 1.3820 to the U.S. dollar, or 72.36 U.S. cents, after trading in a range of 1.3814 to 1.3820. On Monday, the currency touched a near 11-week low at 1.3849.
"The backup in U.S. yields has stalled, leading to some broader consolidation in the USD," said George Davis, chief technical strategist at RBC Capital Markets. "USD-CAD has followed suit as the market awaits tomorrow's Bank of Canada meeting for new direction."
The U.S. 2-year yield was little changed at 4.030% after climbing more than 50 basis points since September, while the U.S. dollar (.DXY), opens new tab held near its highest level against a basket of major currencies since Aug. 2.
Investors expect the BoC to cut its benchmark interest rate by half a percentage point on Wednesday, which would be the first reduction greater than 25 basis points in 15 years outside of the pandemic era.
Since June, the central bank has eased three times by 25 basis points to leave the policy rate at 4.25%.
The price of oil, one of Canada's major exports, rose 2.2% to $72.09 a barrel as traders downplayed hopes of a Middle East ceasefire and focused on a tightening global supply and demand balance.
Producer prices in Canada were down 0.6% in September from August due in part to lower prices for energy and petroleum products.
Canadian bond yields were mixed across the curve. The 10-year was down 0.7 basis points at 3.227%, pulling back from an earlier 11-day high at 3.261%.
Reporting by Fergal Smith; Editing by Leslie Adler
