TORONTO (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Tuesday, pulling back from an earlier three-month high as oil prices fell and ahead of interest rate decisions this week by the Bank of Canada and the U.S. Federal Reserve.
The price of oil, one of Canada's major exports, fell for a second day, pressured by expectations of a rise in U.S. crude inventories and doubts that OPEC and its allies will cut oil output further in December. U.S. crude oil futures (CLc1) were down 1.6% at $54.93 a barrel.
The Bank of Canada is likely to keep interest rates steady at 1.75% on Wednesday in its first policy announcement since the federal election, despite signs that investors seeking higher-yielding currencies are shifting more money into Canadian dollars.
The Fed is also due to make an interest rate announcement on Wednesday. It is expected to lower the range for its policy rate to below the Bank of Canada's equivalent rate for the first time since December 2016.
At 9:52 a.m. (1352 GMT), the Canadian dollar was trading 0.1% lower at 1.3067 to the greenback, or 76.53 U.S. cents. The currency touched its strongest intraday level since July 22 at 1.3043.
The loonie has rallied more than 2% since early October, buoyed by robust domestic jobs data and optimism about prospects for a trade deal between the United States and China. The currency has been the top-performing G10 currency this year, up 4.4% against the greenback.
Canadian government bond prices were higher across the yield curve, with the two-year (CA2YT=RR) price up 2.1 Canadian cents to yield 1.699% and the 10-year (CA10YT=RR) rising 13 Canadian cents to yield 1.605%.
On Monday, the 10-year yield touched its highest since July 16 at 1.628%.