TORONTO, Oct 21 (Reuters) - The Canadian dollar steadied near a four-week high against its US counterpart on Wednesday as investors stuck with bets the Bank of Canada would raise interest rates at a policy decision next week.
The loonie was barely changed at 1.4050 per US dollar, or 71.17 US cents, after touching on Tuesday its strongest intraday level since September 22 at 1.4030.
"The broader move reflects a combination of a softer USD and a more hawkish Bank of Canada," said Tony Valente, senior FX dealer at AscendantFX.
On Saturday, Bank of Canada Governor Tiff Macklem said the central bank expects to raise its quarterly inflation forecast significantly this month owing to persistently high crude oil and petroleum product prices.
Investors see a roughly 80% chance the BoC raises its benchmark interest rate by 25 basis points to 2.50% on October 28.
"Although expectations for a BoC rate hike have increased, the outlook remains uncertain," said Valente, adding that uncertainty around trade relations between the US and Canada is a significant headwind for Canadian economic growth and the loonie.
Canada and the province of Ontario unveiled a C$9 billion joint support package to help the steel and auto sectors deal with US tariffs and also boost critical mineral supply chains.
Canadian retail sales data for August, due on Friday, could offer clues on the state of the domestic economy. Analysts expect sales to rebound 1.3% after falling 0.7% in July.
The price of oil, one of Canada's major exports, fell on Wednesday as investors weighed possible progress toward Russia-Ukraine talks against declining US oil stocks.
US crude oil futures were down 0.9% at $96.98 a barrel, while the US dollar edged 0.1% lower against a basket of major currencies.
Canadian government bond yields eased across the curve, with the 10-year down 2.6 basis points at 3.867%.
Reporting by Fergal Smith; Editing by Nia Williams
