* Canadian dollar strengthens 0.2% against the greenback
* Price of U.S. oil settles 1.6% higher
* Canadian bond yields rise across the curve
TORONTO, March 25 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Monday but was holding near its weakest level in more than three months as the U.S. Federal Reserve officials signaled increased concern about the slow progress in cooling inflation.
The loonie was trading 0.2% higher at 1.3580 to the U.S. dollar, or 74.21 U.S. cents. On Friday, the currency touched its weakest intraday level since Dec. 12 at 1.3614 as the greenback extended recent gains against a basket of major currencies.
"The U.S. dollar is maintaining its strength," said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc. "The main focus for the market is sticky or stubborn inflation pressures which are tying the hands of the Fed."
Fed officials said they still had faith that U.S. inflation will ease, with housing price increases in particular expected to help pull down the headline pace of price increases, but also acknowledged an increased sense of caution around the issue.
U.S. inflation data, due for release on Friday, could guide expectations for the Fed to begin cutting interest rates in the coming months.
"Oil continues to strengthen gradually which normally would be a big support to the loonie but at the moment the market is not focusing on that as much as inflationary stories," Richardson said.
The price of oil, one of Canada's major exports, settled 1.6% higher at $81.95 a barrel as orders from the Russian government to curb oil output, and attacks on energy infrastructure in both Russia and Ukraine offset the United Nation's demand for a ceasefire in the Gaza war.
Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 5.3 basis points at 3.489%. (Reporting by Fergal Smith; Editing by Aurora Ellis)
