Canadian dollar struggles for clear direction amid Ukraine uncertainty

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar was little changed against its U.S. counterpart on Tuesday as investors weighed tentative signs of easing tension in Ukraine and looked ahead to key Canadian inflation data.

The loonie was trading nearly unchanged at 1.2729 to the greenback, or 78.56 U.S. cents, after fluctuating in a range of 1.2702 to 1.2774.

"I think why we are so choppy is because we are not getting a very clear picture on the Russia-Ukraine situation," said Erik Bregar, director, FX & Precious Metals Risk Management, Silver Gold Bull.

"Right now, the Canadian dollar is going to trade like a risk-currency. It's going to follow the tone for the S&Ps (S&P 500 stock market index) more closely than oil."

Wall Street surged in a broad rally after Russia said it had withdrawn some of its troops from the Ukraine border, while the safe-haven U.S. dollar lost ground against a basket of major currencies and the price of oil, one of Canada's major exports, settled 3.6% lower at $92.07 a barrel.

Oil has been supported in recent weeks by the prospect of a disruption in Russian energy supplies.

Domestic data showed that home prices jumped 4.9% in January from December to notch a fresh record, as demand continued to rise even as new listings plunged amid cold and snowy weather.

Canada's inflation report for January, due on Wednesday, could offer clues on the outlook for Bank of Canada interest rate hikes. Money markets expect the central bank to tighten next month for the first time since October 2018.

Canadian government bond yields were higher across a steeper curve, tracking the move in U.S. Treasuries. The 10-year touched its highest level since February 2019 at 1.973%, up 6.7 basis points on the day.

(Reporting by Fergal Smith; Editing by Paul Simao and Marguerita Choy)