TORONTO (Reuters) - The Canadian dollar edged up against its U.S. counterpart on Monday and bond yields climbed to multi-month highs, with the currency recouping a small part of its recent declines that were owed in part to the threat of U.S. trade tariffs.
The loonie was trading 0.1% higher at 1.4405 to the U.S. dollar, or 69.42 U.S. cents, after moving in a range of 1.4393 to 1.4447. In December, the currency touched a near 5-year low at 1.4467.
"It does feel like the market is paying a lot of tribute to the potential incoming tariffs from the United States and also what that could mean for the Bank of Canada," said Bipan Rai, head of ETF and structured solutions strategy at BMO Global Asset Management.
"There is a lot priced in already with respect to the loonie in terms of incoming risk."
The Bank of Canada has said the possibility of U.S. tariffs represented a major new uncertainty.
Still, investors have become slightly less confident the BoC will continue cutting interest rates this month after data on Friday showed that the Canadian economy added many more jobs than expected in December.
Speculators have raised their bearish bets on the Canadian dollar to historically high levels, data from the U.S. Commodity Futures Trading Commission has shown in recent weeks.
The U.S. dollar extended its recent gains against a basket of major currencies as investors scaled back bets of Federal Reserve rate cuts this year.
The price of oil, one of Canada's major exports, settled 2.9% higher at $78.82 a barrel on expectations that wider U.S. sanctions on Russian oil would force buyers in India and China to seek other suppliers.
The Canadian 10-year yield was up 6.5 basis points at 3.507%, its seventh straight day of increases and its highest level since July 9.
(Reporting by Fergal Smith; Editing by Andrea Ricci)
By Fergal Smith