Canadian dollar edges higher ahead of domestic GDP data

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened on Wednesday against its U.S. counterpart but the move was limited as investors awaited domestic gross domestic product data that could guide expectations for the start of Bank of Canada interest rate cuts.

The loonie was trading 0.1% higher at 1.3575 to the U.S. dollar, or 73.66 U.S. cents, after trading in a range of 1.3572 to 1.3608.

It was the third straight day of little movement for the currency since Friday when it touched a three-month low at 1.3614.

"We run a fair model and that fair value model is basically bang on where the market is right now. So I feel like everything is in balance at this point," said Amo Sahota, director at Klarity FX in San Francisco.

Canadian GDP data, due on Thursday, is expected to show the economy growing 0.4% in January from December.

"There is some danger there that if GDP comes in a little softer than anticipated it might be enough to push USD-CAD out of this little range," Sahota said. "The Bank of Canada keeps telling us that growth is slow."

Money markets expect the Canadian central bank to leave its benchmark interest rate on hold at a 22-year high of 5% at a policy decision on April 10 but to then begin a rate cutting campaign in June.

The price of oil, one of Canada's major exports, settled 0.3% lower at $81.35 a barrel after data showed a surprise increase in U.S. stockpiles. Prices have retreated since climbing last week to their highest levels since October.

Canadian government bond yields moved lower across a flatter curve. The 10-year was down 4.2 basis points at 3.457%.

(Reporting by Fergal Smith; Editing by Sandra Maler)