Investing.com - The U.S. dollar pulled back from session highs against the Canadian dollar on Tuesday after official data showed that the Canadian economy contracted in January, but not as deeply as some market watchers had feared.
USD/CAD was at 1.2727, down from around 1.2783 ahead of the report.
Statistics Canada said the economy contracted 0.1% in January, slowing after recording growth of 0.3% in December.
While economists had forecast growth of 0.2%, some investors had feared a contraction of 0.2% due to the impact of lower oil prices.
On a year-over-year basis Canada’s economy grew 2.4% in January, in line with expectations, following growth of 2.8% in the preceding month.
Demand for the dollar continued to be underpinned as investors looked ahead to Friday’s U.S. nonfarm payrolls report for further indications on the path of monetary policy.
The greenback has been boosted this year by expectations for higher interest rates, but its rally paused after the Federal Reserve statement released on March 18 indicated that it may hike rates more gradually than markets had expected.
Late last week Fed Chair Janet Yellen said a rate hike may be warranted later this year, but added that weakening inflation pressures could force the Fed to delay. The Fed head said policy tightening could "speed up, slow down, pause, or even reverse course" depending on how the economy is performing.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.48% to 98.77.
The U.S. was to release data on consumer confidence later in the day.