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Canadian dollar nears 2-month high on firm oil prices

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·2 min read
FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Tuesday as oil prices held near multiyear highs and recent domestic jobs data supported the case for another cut later this month to the Bank of Canada's bond purchase program.

The loonie was trading 0.2% higher at 1.2463 to the greenback, or 80.24 U.S. cents, after trading in a range of 1.2450 to 1.2498. On Monday, the currency touched its strongest level since July 30 at 1.2444.

"We think there may be a little more to come from the CAD ahead of the year-end," strategists at Scotiabank, including Shaun Osborne, said in a note.

"A monster jobs report last Friday, firm crude oil prices ... bolster the case for further reduction in BoC asset purchases at the October 27th policy meeting."

Data on Friday showed that the Canadian economy posted a gain of 157,000 jobs in September, pushing employment back to its pre-pandemic levels.

The Bank of Canada is due on Oct. 27 to make an interest rate announcement and update its economic forecasts.

The price of oil, one of Canada's major exports, rose 0.2% to $80.65 a barrel after touching on Monday a seven-year high at $82.18.

Still, speculators have raised their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Oct. 5, net short positions had increased to 26,866 contracts from 20,235 in the prior week.

Canadian government bond yields were higher across much of a flatter curve as trading resumed following Monday's Thanksgiving Day holiday.

The 2-year yield climbed 4 basis points to 0.730%. That was its highest level since March 2020 and 38.6 basis points above its U.S. equivalent, the widest gap since January 2015.

(Reporting by Fergal Smith; editing by Jonathan Oatis)