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The Canadian dollar CADUSD weakened against its U.S. counterpart on Monday, pulling back from a one-week high, as investors weighed prospects of a dovish shift from the Bank of Canada at a policy decision this week.

The loonie was trading 0.4 per cent lower at 1.3480 to the greenback, or 74.18 U.S. cents, after earlier touching its strongest level since Jan. 15 at 1.3416. It had benefited on Friday from a pick-up in risk appetite.

“It feels more like a consolidative day,” said Amo Sahota, director at Klarity FX in San Francisco. “Obviously expectations are moving into what will the Bank of Canada do on Wednesday.”

The Bank of Canada is expected to leave its key overnight rate unchanged at a 22-year high of 5 per cent at a policy decision on Wednesday, when the central bank is also due to update its forecasts on inflation and economic growth.

If the central bank lowers its growth forecasts then the market could start betting on earlier interest rate cuts, Sahota said.

Speculators have raised their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Jan. 16, net short positions had increased to 13,388 contracts from 7,380 in the prior week.

The price of oil, one of Canada’s major exports, settled 2.4 per cent higher at $75.19 a barrel as traders saw oil supply tightening due to conflicts in the Middle East and Ukraine, and extreme North American cold weather.

Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries. The 10-year was down 3.5 basis points at 3.456 per cent, after touching on Friday its highest intraday level in seven weeks at 3.536 per cent.

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