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Canadian dollar weakens 0.1% against the greenback

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Loonie trades in a range of 1.3548 to 1.3598

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Price of U.S. oil settles 1.4% lower

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Canadian bond yields fall across the curve

By Fergal Smith

TORONTO, April 9 (Reuters) - The Canadian dollar edged

lower against its U.S. counterpart on Tuesday as oil prices fell

and investors priced in some risk that the Bank of Canada would

signal the start of an interest rate cutting campaign at this

week's policy decision.

Money markets expect the Canadian central bank to leave its

benchmark rate on hold at a 22-year high of 5% on Wednesday but

to then begin cutting in June.

"Even if the Bank of Canada does not cut rates tomorrow, the

market seems to be positioned for either a dovish comment or

further weakness in the Canadian dollar," said Marc Chandler,

chief market strategist at Bannockburn Global Forex LLC.

Speculators have raised their bearish bets on the Canadian

dollar to the highest since December, data from the U.S.

Commodity Futures Trading Commission showed on Friday.

"The case (for a rate cut) is building ... inflation has

fallen more than expected for the past two months and the

unemployment rate is up to 6.1% from 5% a year ago," Chandler

said.

The Canadian dollar was trading 0.1% lower at 1.3585

to the U.S. dollar, or 73.61 U.S. cents, after trading in a

range of 1.3548 to 1.3598. On Friday, it touched a three-month

low at 1.3647.

U.S. crude oil futures settled down 1.4% at $85.20 a

barrel, giving back some recent gains for a second day. Oil is

one of Canada's major exports.

Canadian government bond yields moved lower across the

curve, tracking moves in U.S. Treasuries after a former Federal

Reserve official said that three interest rate cuts remain

likely this year.

The 10-year was down 6.4 basis points at 3.562%,

after approaching on Monday the top of its range for the past

few months.