Canadian dollar gains as oil climbs to near six-month high

By Fergal Smith TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday as oil prices jumped to fresh multi-month highs, while investors awaited an interest rate decision this week from the Bank of Canada. The price of oil, one of Canada's major exports, rose to its highest since October on growing concern about tight global supplies after the United States announced a further clampdown on Iranian oil exports. U.S. crude oil futures settled 2.7% higher at $65.70 a barrel. "We all know how correlated the Canadian dollar is with crude oil," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. "We are seeing the Canadian dollar dribble higher but I would say the real party is on Wednesday." The Bank of Canada is expected to hold its benchmark interest rate steady at 1.75% on Wednesday and for the rest of this year, with calls for the next hike in early 2020 resting on a knife's edge, a Reuters poll showed. "What we are telling our clients, you just have to be on guard for something a little more cautious than the market is expecting," Bregar said. "I feel like the market is coiling up for a big move." Earlier this month, Bank of Canada Governor Stephen Poloz said trade uncertainties are weighing on Canada and the global economy, which is not performing as well as had been expected just a few months ago. Last week, a Bank of Canada survey showing softer business sentiment offset domestic data showing higher retail sales and underlying inflation. At 3:54 p.m. (1954 GMT), the Canadian dollar was trading up 0.4% at 1.3347 to the greenback, or 74.92 U.S. cents. The currency, which fell 0.5% last week, traded in a range of 1.3334 to 1.3389. Speculators have raised their bearish bets on the Canadian dollar to the highest since January, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of April 16, net short positions had climbed to 49,162 contracts from 43,202 in the prior week. Canadian government bond prices were mixed across a steeper yield curve in sympathy with U.S. Treasuries. The two-year gained 1 Canadian cent to yield 1.62% and the 10-year was down 21 Canadian cents to yield 1.788%. The 10-year yield rose 2.7 basis points further above the 2-year yield to a spread of 16.8 basis points, its widest since March 1. (Reporting by Fergal Smith; Editing by Lisa Shumaker)