(Adds dealer quotes and details throughout, updates prices) * Loonie gains 0.1% against the U.S. dollar * Canadian manufacturing PMI rises in October * Price of U.S. oil settles 0.6% higher * Canadian 10-year yield touches a 2-1/2-year high By Fergal Smith TORONTO, Nov 1 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Monday as oil prices rose, but the currency stuck to a narrow trading range ahead of a key Federal Reserve policy meeting this week. The loonie was trading 0.1% higher at 1.2369 to the greenback, or 80.85 U.S. cents, after trading in a range of 1.2352 to 1.2403. "The Bank of Canada was rather hawkish last week ... This week it is the Fed"s turn," said Tony Valente, senior FX dealer at AscendantFX. The Fed is expected on Wednesday to say it will start to taper bond purchases. "On paper, it should be bullish for the USD. However, all of the other central banks are more hawkish than the Fed," Valente said. The Bank of England could bow to inflation pressures and become the first major central bank to raise rates on Thursday. Last week, the Bank of Canada ended its quantitative easing program and said it could hike rates as soon as April, expecting slack in the economy to be absorbed sooner than previously thought. Canadian manufacturing activity grew in October at the fastest pace in seven months as a pick-up in new orders and hiring offset mounting supply chain pressures, data showed on Monday. The IHS Markit Canada Manufacturing Purchasing Managers" Index (PMI) rose to a seasonally adjusted 57.7 in October from 57.0 in September. The price of oil, one of Canada"s major exports, was supported by expectations of strong demand. U.S. crude prices settled 0.6% higher at $84.05 a barrel. Canadian government bond yields were mixed across the curve. The 10-year touched its highest level since May 2019 at 1.766% before dipping to 1.729%, up about half a basis point on the day. (Reporting by Fergal Smith; Editing by Alex Richardson and Alison Williams)