Higher oil prices lift CAD on eve of BoC rate decision

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Tuesday, with the currency recovering from a 10-day low as oil prices rose and investors awaited a Bank of Canada interest rate decision this week.

The loonie was up 0.3% at 1.3470 to the greenback, or 74.24 U.S. cents. On Monday, it touched its weakest intraday level since March 31 at 1.3553.

"We've seen the Canadian dollar strengthen slightly on the back of oil," said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc.

"The market is really waiting for U.S. inflation figures and the Bank of Canada tomorrow. That's the big market mover."

The Canadian central bank is expected to take in stride surprising recent economic strength and leave its benchmark rate unchanged at a 15-year high of 4.50% at its policy announcement on Wednesday, betting that activity will cool as higher borrowing costs sink in.

Last month, the BoC paused its tightening campaign after eight consecutive rate hikes.

The price of oil, one of Canada's major exports, settled 2.2% higher at $81.53 a barrel amid hopes that the Federal Reserve might also ease up on its policy tightening.

U.S. consumer price index data for March, due on Wednesday, could offer clues on the Fed policy outlook.

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

The 10-year touched its highest level since April 3 at 2.951% before dipping to 2.924%, up 2.1 basis points on the day.

(Reporting by Fergal Smith; Editing by Paul Simao and Alistair Bell)