* Canadian dollar at C$1.3124, or 76.20 U.S. cents
* U.S. oil rises 0.4 percent
* Bond prices higher across a flatter yield curve
* Canada's 2-year yield touches six-week high
By Fergal Smith
TORONTO, July 10 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Tuesday as investors awaited guidance on the economic outlook that could accompany a potential interest rate hike from the Bank of Canada on Wednesday.
Money markets see a greater than 90 percent chance that the central bank will lift its policy rate by 25 basis points, to 1.50 percent, which would be the fourth hike since last summer. BOCWATCH
With a rate hike largely priced in, direction for the loonie could rest on the Bank of Canada's outlook for the economy.
"It really depends on how the market interprets the communique tomorrow," said Bipan Rai, North America head of FX strategy at CIBC Capital Markets.
Rai expects the central bank to use neutral language, which could disappoint investors who are looking for a "dovish hike" in the face of elevated trade uncertainty.
A dovish hike refers to a rate increase accompanied by guidance from the central bank that reduces expectations for additional tightening.
A trade row between Canada and the United States will not be enough to stop the Bank of Canada from raising rates this week, but bigger storm clouds over trade could mean it is the last hike for a while, analysts and financial markets believe. 3:30 p.m. EDT (1930 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent lower at C$1.3124 to the greenback, or 76.20 U.S. cents.
The currency, which on Monday touched its strongest intraday level in nearly four weeks, at C$1.3066, traded in a range of C$1.3103 to C$1.3146.
The price of oil, one of Canada's major exports, was supported by supply concerns in Norway and Libya. U.S. crude oil futures CLc1 settled 0.4 percent higher at $74.11 a barrel. have raised bearish bets on the Canadian dollar to the most since June 2017, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Monday. value of Canadian building permits rose 4.7 percent in May from April, reversing the prior month's decline, Statistics Canada said. from the Canada Mortgage and Housing Corp showed that Canadian housing starts surged in June. government bond prices were higher across a flatter yield curve, with the two-year CA2YT=RR up 1 Canadian cent to yield 1.939 percent and the 10-year CA10YT=RR up 14 Canadian cents to yield 2.153 percent.
The two-year yield touched its highest intraday level since May 25 at 1.959 percent.