Investing.com - The Canadian dollar was trading close to 14-month highs against its broadly weaker U.S. counterpart on Tuesday, supported by higher prices for oil, a major Canadian export.
USD/CAD was at 1.2491 by 09.53 a.m. ET (02.53 p.m. GMT), close to Monday’s 14-month trough of 1.2482.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.33% to 93.52.
The index has fallen around 2% so far this month and is down 8% for the year to date.
The greenback remained on the back foot with the Federal Reserve’s two-day meeting kicking off later in the day, with no changes to monetary policy expected.
Investors were hoping that the bank’s rate statement will reveal more about the Fed’s policy plans for the second half of the year, with markets paying close attention to indications on the timing of the next interest rate hike.
Doubts over the Feds plans for a third rate hike this year have fed into recent dollar weakness.
Investors also remained focused on the investigation into alleged links between U.S. President Donald Trump’s administration and Russia in last year’s election.
Investors fear the persistent political turmoil in Washington will derail the Trump administration’s pro-growth economic agenda of tax cuts and infrastructure spending, which helped propel the dollar index to 14-year peaks after the November election.
The loonie was supported by higher oil prices, which were boosted by hopes after OPEC producers pledged additional measures to help speed up the rebalancing of the oversupplied global market.
Demand for the Canadian dollar was also underpinned by expectations for higher interest rates after the country’s central bank hiked rates for the first time in seven years this month and indicated that it will need to hike again in the coming months.