TORONTO: The Canadian dollar was little changed against its US counterpart on Wednesday as the market braced for the Bank of Canada monetary policy decision, while crude oil prices rose and US stocks opened higher.
The currency has rebounded more than 9 percent since hitting a 12-year low on Jan. 20 at C$1.4689 when the central bank surprised many traders by not cutting rates.
However, too sharp a rally in the currency could hinder a pick-up in exports that appears to be underway.
"The appreciation could weigh toward a slightly dovish tone in the policy statement," said BMO Capital Markets in a research note.
The central bank is expected to hold interest rates at 0.50 percent as it waits to see what impact the government's expected spending measures will have on the economy. The measures will be presented with the March 22 budget.
The implied probability of a rate cut this year has dropped to less than 40 percent from around 80 percent just two weeks ago.
US crude prices were up 1.67 percent to $37.11 a barrel, driven by anticipation that the world's largest exporters may agree as soon as this month to freeze output.
At 9:28 a.m. EST (1428 GMT), the Canadian dollar was trading at C$1.3421 to the greenback, or 74.51 US cents, slightly weaker than Tuesday's close of C$1.3416, or 74.54 US
The currency's strongest level of the session was C$1.3379, while its weakest level was C$1.3447.
On Monday, it had touched its strongest since Nov. 19 at
C$1.3262.
Canadian government bond prices were lower across the maturity curve as risk appetite improved, with the two-year price down 2.5 Canadian cents to yield 0.506 percent and the benchmark 10-year falling 43 Canadian cents to yield 1.228 percent.
The curve steepened in sympathy with US Treasuries, as the spread between the 2-year and 10-year yields widened 3.4 basis points to 72.2 basis points, indicating underperformance for longer-dated maturities.
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