TORONTO: The Canadian dollar edged higher against its US counterpart on Tuesday as a rebound in oil prices offset broader gains for the greenback, with investors awaiting US inflation data for clues on the outlook for Federal Reserve policy.

The loonie was trading 0.1% higher at 1.2566 to the greenback, or 79.58 US cents, with the currency rebounding after it earlier touched its weakest level since July 28 at 1.2589.

The loonie has oscillated this week around its 200-day moving average, which is 1.2571.

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US crude prices were up 1.2% at $67.26 a barrel, recouping some of the losses in the previous session, as rising demand in Europe and the United States outweighed concerns over the spread of COVID-19 cases in Asian countries.

The US dollar rose against a basket of major currencies as investors looked ahead to the release of US inflation numbers on Wednesday for further indications of when the Fed may start to withdraw its stimulus for the economy.

Talk that the US central bank would taper its bond purchases earlier than previously expected has been amped up by last Friday's strong US jobs data.

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Canadian government bond yields edged lower across the curve, with the 10-year down about half a basis point at 1.248%. Earlier in the day, it touched its highest level since July 16 at 1.268%.