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The Canadian dollar edged slightly higher against its U.S. counterpart on Monday, with the currency on track to break its six-day losing streak as investors awaited a potential Federal Reserve interest rate cut this week.

The Fed is expected to cut interest rates by 25 basis points this week, for what would be the first rate cut since the financial crisis.

“It’s just a holding period (for the loonie) ahead of the Fed” said Erik Nelson, a currency strategist at Wells Fargo.

Earlier this month, the Bank of Canada diverged from some other major central banks, making clear it had no intention of easing monetary policy as it left its benchmark interest rate on hold at 1.75 per cent.

At 3:33 a.m. (1933 GMT), the Canadian dollar was trading 0.1 per cent higher at 1.3156 to the greenback, or 76.01 U.S. cents. The currency, which touched on Friday a month-low intraday at 1.3199, traded in a range of 1.3149 to 1.3182.

The last time the loonie gained was July 18.

Meanwhile, the price of oil, one of Canada’s major exports, increased on Monday as the prospect of an expected interest rate cut by the U.S. Federal Reserve overshadowed pessimism over U.S.-China trade talks and worries about slower global economic growth. U.S. crude oil future settled 1.2 per cent higher at $56.87 a barrel.

Canadian government bond prices were lower across the yield curve, with the two-year down 1 Canadian cent to yield 1.478 per cent and the 10-year falling 3 Canadian cents to yield 1.469 per cent.

The gap between Canada’s 10-year yield and its U.S. equivalent narrowed by 2.9 basis points to a spread of 58.6 basis points in favor of the U.S. bond. On Friday, it touched its widest gap in nearly five weeks at 61.5 basis points.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/05/24 4:59pm EDT.

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