Dollar flat, bonds end losing streak

By Cameron French

TORONTO - The Canadian dollar eased slightly against the U.S. dollar on Tuesday, ignoring stronger energy prices as market activity slowed ahead of a crucial U.S. Federal Reserve meeting.

Bond prices regained some of the past week's losses, as dealers eyed the Fed, while keeping an eye out for Canadian data due later in the week.

The currency finished at C$1.1226 to the U.S. dollar, or 89.08 U.S. cents, little changed from C$1.1227 to the U.S. dollar, or 89.07 U.S. cents, at Monday's close.

The U.S. central bank meets for two days, and is expected to announce a 17th-straight interest rate increase on Thursday. But with markets uncertain of how far the Fed might go before stopping, traders largely guarded their positions on Tuesday.

A heavy slate of Canadian data is also due on Thursday, including May raw materials and producer prices, and April economic growth.

"The tight range today pretty much screams that everyone's sitting tight ahead of the Canadian data and ahead of the (Fed)," said Ted Gould, a trader at Investors Bank & Trust in Boston.

The currency moved in a slim range of 88.88 U.S. cents to 89.29 U.S. cents during the session as the central bank anticipation distracted from oil prices that crept higher for a sixth-straight session.

An aggressive Fed would likely stoke expectations that the Bank of Canada still has one or two more hikes moves under its hat as well. Canada's central bank has boosted rates seven straight times, but signaled in May it was likely finished.

However, strong Canadian data over the past few weeks have changed the market's mind on the issue, prompting the bond market to price in another quarter-point increase.

"It is interest rates that move currencies ultimately, and central bankers that move interest rates. So commodity markets play second fiddle to that right now," Gould said.

Strong U.S. consumer confidence and home sales data released early in the session had little impact on the currency.