Canadian dollar steadies near 3-week high ahead of BoC decision

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar was little changed against the greenback on Wednesday, holding near its strongest level in almost three weeks as fears eased about the economic impact of the Omicron variant and ahead of a Bank of Canada interest rate decision.

The loonie was trading nearly unchanged at 1.2641 to the greenback, or 79.11 U.S. cents, after touching its strongest intraday level since Nov. 19 at 1.2616.

"The CAD has benefited from the unwind in the Omicron premium so far," Bipan Rai, North America head, FX Strategy at CIBC Capital Markets, said in a note.

A rebound in market sentiment continued, with world shares set for their biggest two-day jump since November last year as investors became less concerned about the variant and the price of oil rose 0.3% to $72.27 a barrel.

Oil is one of Canada's major exports.

The Bank of Canada interest rate announcement is due at 10 a.m. (1500 GMT). Money markets expect rate hikes to begin in January or March, which is an earlier time frame than the central bank has been guiding.

Without the new variant, the strength of recent inflation, employment and GDP data "would be enough to signal a hike at next month's meeting," Rai said.

Canadian government bond yields edged higher across a flatter curve. The 10-year rate touched its highest level since Dec. 1 at 1.593% before dipping to 1.583%, up less than half a basis point on the day.

(Reporting by Fergal Smith; Editing by Nick Zieminski)