Canadian dollar flat as investors await Bank of Canada rate decision

TORONTO (Reuters) - The Canadian dollar was unchanged against its U.S. counterpart on Wednesday as investors braced for the Bank of Canada’s interest rate decision, oil prices rose, and the greenback dipped against a basket of major currencies.

FILE PHOTO - A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

The Bank of Canada is widely expected to raise interest rates for the first time in nearly seven years, following the U.S. Federal Reserve in trying to inch them back to normal after the global financial crisis a decade ago.

But the rapid climb in Canadian yields since the Bank of Canada turned hawkish last month may have gone far enough for the central bank, which is also concerned about risks to financial stability. Higher yields are already pushing up borrowing costs for highly indebted Canadians.

At 8:55 a.m. ET (1255 GMT), the Canadian dollar CAD=D4 was trading unchanged at C$1.2915 to the greenback, or 77.43 U.S. cents.

The currency traded in a range of C$1.2894 to C$1.2941.

Prices of oil, one of Canada’s major exports, climbed after data showed a fall in U.S. fuel inventories and the U.S. government lowered its forecast for crude output.

U.S. crude CLc1 was up 2.0 percent at $45.94 a barrel.

The U.S. dollar .DXY lost ground after the release of Fed Chair Janet Yellen's prepared testimony to be delivered to Congress Wednesday morning.

Canadian home prices rose in June, with the cities of Toronto and Hamilton leading the way despite provincial government efforts to rein in demand in the hot markets, data showed.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR price rose 9 Canadian cents to yield 1.11 percent, and the 10-year CA10YT=RR climbed 38 Canadian cents to yield 1.85 percent.

On Tuesday, the 10-year yield touched its highest since June 2015 at 1.903 percent.

Reporting by Fergal Smith; Editing by Lisa Von Ahn