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Canadian dollar dips slightly against firmer greenback as oil climbs

The Canadian dollar edged lower against its U.S. counterpart on Tuesday as a stronger greenback offset higher prices for crude oil, one of Canada’s major exports.

The Canadian dollar edged lower against its U.S. counterpart on Tuesday as a stronger greenback offset higher prices for crude oil, one of Canada's major exports.

The U.S. dollar rose to an 11-day high against a basket of major currencies, continuing a recovery from four-month lows plumbed at the start of the year.

Oil rose to its highest since May 2015, supported by OPEC-led production cuts and expectations U.S. crude inventories fell for an eighth week.

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U.S. crude prices were up 0.75 per cent at $62.19 a barrel.

At 9:14 a.m. EST, the Canadian dollar was trading at $1.2433 to the greenback, or 80.43 U.S. cents, down 0.1 per cent. The currency traded in a range of $1.2399 to $1.2448.

The loonie touched its strongest level in three months at $1.2355 on Friday after stronger-than-expected domestic jobs data prompted investors to bet on a Bank of Canada interest rate hike as soon as Jan. 17.

Chances of a rate hike next week have more than doubled to 80 per cent since the jobs data, the overnight index swaps market indicated. They got a further boost from a Bank of Canada business survey on Monday that showed optimism.

Canadian government bond prices were lower across a steeper yield curve, with the two-year down 2 cents to yield 1.796 per cent and the 10-year falling 22 cents to yield 2.184 per cent.

The 2-year yield touched its highest intraday since June 2011 at 1.799 per cent.

Canadian housing starts fell in December to a seasonally adjusted annual rate of 216,980 from November's downwardly revised 251,675. Economists had expected a decline to a 212,500 annual rate.

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