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Investing.com - The U.S. dollar rose to session highs against the Canadian dollar in early trade on Monday as expectations for an early hike in U.S. interest rates continued to underpin dollar demand.
USD/CAD was up 0.48% to 1.1004, the highest since Thursday, from 1.0962 late Friday.
The pair was likely to find support at around the 1.0925 level and resistance at about 1.1030.
Demand for the greenback continued to be underpinned as indications that the economic recovery is making solid progress fuelled expectations that the Federal Reserve will hike interest rates sooner than markets are expecting.
Last week, the Fed offered fresh guidance on its plans to raise interest rates, outlining in more detail how it will start to raise short term interest rates when the time comes.
Investors were looking ahead to preliminary data on China’s HSBC manufacturing index due to be release early on Tuesday as concerns over a possible slowdown in the world’s second largest economy weighed on market sentiment.
Elsewhere, the loonie, as the Canadian dollar is also known, was lower against the euro, with EUR/CAD rising 0.60% to 1.4133.
The loonie remained broadly weaker despite data on Friday showing that the annual rate of core inflation in Canada rose at the fastest rate in over two years last month.
The annual core inflation rate, which excludes volatile items such as some food and energy costs, rose 2.1% in August. It was the highest level since April 2012, and outstripped forecasts for a 1.8% increase.
The annual headline rate of inflation was unchanged at 2.1% last month, in line with forecasts.
The strong increase in core inflation boosted expectations that the Bank of Canada may shift away from its neutral stance on interest rates sooner than expected.
Earlier in the week, BoC Governor Stephen Poloz said he was in no hurry to move away from the central bank's neutral rate stance amid indications that a slow recovery in Canadian exports is underway.
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