By Fergal Smith
TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Wednesday, with the currency rebounding from its lowest level in nearly eight weeks as investor sentiment picked up and the Bank of Canada raised interest rates to a 14-year high.
The loonie was trading 0.1% higher at 1.3135 to the greenback, or 76.13 U.S. cents, after earlier touching its weakest since July 14 at 1.3208.
"We're seeing a strong bounce in the Canadian dollar today, not so much because of the expected 75 bp rate hike from the Bank of Canada, but because of broad USD selling on the back of a constructive risk backdrop," said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
U.S. stock indexes climbed following a recent selloff as bond yields eased. In contrast, the price of oil fell to its lowest level since Russia's Feb. 24 invasion of Ukraine, settling 5.7% lower at $81.94 a barrel.
Oil is one of Canada's major exports.
The BoC hiked its benchmark rate by three-quarters of a percentage point to 3.25%, as expected, and signaled its most aggressive tightening campaign in decades was not yet done as it battles to tame inflation.
Money markets expect about 50 basis points of additional tightening by the end of 2022..
"It does feel as though the bank is preparing the market for the possibility that rates will need to keep moving higher for more than one or two more meetings," said Andrew Kelvin, chief Canada strategist at TD Securities.
Canadian bond yields eased across a flatter curve, tracking the move in U.S. Treasuries. The 10-year was down 7.7 basis points at 3.122%, after touching on Tuesday its highest intraday level in nearly two months at 3.244%.