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Canadian dollar gains 0.3% against the greenback

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Touches its strongest since June 4 at 1.3651

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Price of U.S. oil settles 1.1% higher

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Canadian bond yields trade mixed across the curve

By Fergal Smith

TORONTO, June 24 (Reuters) - The Canadian dollar

strengthened to a near three-week high against its U.S.

counterpart on Monday as investors took stock of recent

broad-based gains for the greenback and the Bank of Canada said

the economy could grow as inflation cools.

The loonie was trading 0.3% higher at 1.3651 to the

U.S. dollar, or 73.25 U.S. cents, its strongest level since June

4.

"We are seeing a little bit of position squaring," said

Michael Goshko, senior market analyst at Convera Canada.

"Traders are very long of U.S. dollars."

The U.S. dollar pulled back from a seven-week against

a basket of major currencies, while the price of oil, one of

Canada's major exports, settled 1.1% higher at $81.63 a barrel.

There is enough slack in the Canadian labor market to allow

for growth and the creation of more jobs even as the inflation

rate continues to decline, said Bank of Canada Governor Tiff

Macklem.

"Governor Macklem believes that a soft landing is still in

the cards," Tiago Figueiredo, a macro strategist at Desjardins,

said in a note.

Canada's consumer price index report, due on Tuesday, is

expected to show inflation easing to an annual rate of 2.6% in

May from 2.7% in April.

Data in line with expectations could make a rate cut next

month "a virtual certainty," Convera Canada's Goshko said.

Investors see a 72% chance that the BoC would cut interest

rates further at the next policy decision on July 24, swaps

market data shows.

Earlier this month, the BoC became the first G7 central bank

to ease policy, cutting its benchmark rate by 25 basis points to

4.75%.

Canadian government bond yields were mixed across a more

deeply inverted curve. The 2-year was up 1.8 basis

points at 3.941%.