TORONTO: The Canadian dollar edged higher against its U.S. counterpart on Monday as an easing of China’s COVID-19 restrictions bolstered oil prices and ahead of a Bank of Canada interest rate decision this week.

The loonie was trading 0.2% higher at 1.3440 to the greenback, or 74.40 U.S. cents, after touching its strongest level since Nov. 25 at 1.3386.

Oil prices rose after OPEC+ nations held their output targets steady and as more Chinese cities eased COVID-19 curbs over the weekend, possibly improving the outlook for fuel demand. Canada is a major exporter of oil.

U.S. crude prices were up nearly 3% at $82.35 a barrel, while the U.S. dollar touched a five-month low against a basket of major currencies before recouping much of its decline.

The greenback extended its recent decline even as November’s robust U.S. payrolls report challenged hopes for less aggressive interest rate hikes by the Federal Reserve.

The Bank of Canada has also been tightening at a rapid pace. As the central bank considers ditching oversized interest rate hikes, it’s dealing with an economy likely more overheated than previously thought but also the bond market’s clearest signal yet that recession and lower inflation lie ahead.

Money markets are betting on a 25-basis-point increase when the BoC meets to set policy on Wednesday, with a roughly 30% chance of a larger move.

Speculators have raised their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Nov. 29, net short positions had increased to 16,116 contracts from 11,672 in the prior week.

Canadian bond yields were higher across the curve, tracking the move in U.S. Treasuries.

The 10-year rose 4.3 basis points to 2.822%, after on Friday touching its lowest intraday level since Aug. 16 at 2.771%.