TORONTO: The Canadian dollar edged higher against its U.S. counterpart on Monday as oil prices rose and investors looked to scale back their optimism on the outlook for the greenback ahead of a key U.S. inflation report.

The loonie was trading 0.2pc higher at 1.2668 to the greenback, or 78.94 U.S. cents, after trading in a range of 1.2637 to 1.2694.

"It almost feels as though the (U.S.) dollar longs don't want to get too carried away ahead of tomorrow's U.S. CPI report," said Erik Bregar, an independent FX analyst.

A weaker than expected outcome could become "another excuse" for the U.S. Federal Reserve to delay tapering its asset purchases, Bregar said.

Canadian dollar notches 2-week high as Fed taper fears ebb

The price of oil, one of Canada's major exports, settled 1.1pc higher at $70.45 a barrel as U.S. output remains slow to return two weeks after Hurricane Ida slammed into the Gulf Coast.

Data on Friday showed that Canadian employment has climbed to within 1pc of pre-pandemic levels but the boost the loonie got from the data was offset by uncertainty ahead of the Sept. 20 federal election and broad-based gains for the U.S. dollar.

Canadian Prime Minister Justin Trudeau on Monday said if Re-elected, he would ban people from protesting outside hospitals and accused his chief rival of supporting those who oppose COVID-19 vaccinations.

Canadian government bond yields were lower across a flatter curve, with the 10-year down 1.5 basis points at 1.222pc.