Canadian dollar clings to eight-month high as investors bet on Fed rate cut

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/File Photo

TORONTO (Reuters) - The Canadian dollar strengthened very slightly to an eight-month high against its U.S. counterpart on Thursday as investors bet that the U.S. Federal Reserve would cut interest rates this month.

The expectation that the Fed and other major central banks would embrace looser monetary policy kept government bond yields near multi-year lows and pushed world stocks to new 18-month highs.

Meanwhile, recent Canadian data, including a report on Wednesday showing a surprise swing in the trade balance to surplus, has dampened expectations that the Bank of Canada would cut interest rates this year.BOCWATCH

The central bank will next week make an interest rate decision and revise its growth forecasts for the economy.

At 9:55 a.m. (1355 GMT), the Canadian dollar CAD=D4 was trading less than 0.1% higher at 1.3055 to the greenback, its strongest level since Nov. 2, last year. Its weakest was 1.3079.

The narrow range for the currency came as markets were closed in the United States for the Independence Day holiday.

The loonie notched an eight-month high even as the price of oil, one of Canada's major exports, was weighed down by data showing a smaller-than-expected draw on U.S. crude stockpiles along with worries about the global economy. U.S. crude oil futures CLc1 were down 0.7% at $56.94 a barrel.

Canadian government bond prices were lower across the yield curve. The two-year CA2YT=RR fell 2 Canadian cents to yield 1.509%, its highest yield since May 29, while the 10-year CA10YT=RR was down 10 Canadian cents to yield 1.466%.

Canada’s jobs report for June is due on Friday.

Reporting by Fergal Smith; Editing by Sandra Maler