The Canadian dollar strengthened to its highest level in more than three months against its U.S. counterpart on Tuesday as oil prices rose and the greenback broadly lost ground.
The U.S. dollar retreated to a three-week low, hit by a proliferation of interest rate-hike bets in other markets.
“The USD is under attack across the board with gains mostly coming from the commodity FX bloc,” Bipan Rai, North America head of FX strategy at CIBC Capital Markets, said in a note.
Story continues below advertisement
Canada is a major producer of commodities, including oil.
U.S. crude prices were up 0.7 per cent at $82.99 a barrel as a supply crunch in natural gas, electricity and coal continued across the globe, while falling temperatures in China revived concerns over whether the world’s biggest energy consumer can meet domestic demand for heating.
Other commodity-linked currencies, such as the Australian dollar , New Zealand dollar and the Norwegian crown , also gained ground.
The Canadian dollar was trading 0.2 per cent higher at 1.2354 to the greenback, or 80.95 U.S. cents, after touching its strongest level since July 6 at 1.2312.
Story continues below advertisement
Gains for the loonie came after a Bank of Canada survey on Monday showed that companies anticipate stronger demand as the COVID-19 pandemic fades.
The survey “likely added to CAD strength, perhaps as businesses expect to raise prices going forward,” strategists at Action Economics said in a note.
Investors see a risk that above-target inflation could contribute to faster-than-expected interest rate hikes from the Bank of Canada.
Canada’s inflation report for September is due on Wednesday.
Story continues below advertisement
Canadian government bond yields were higher across much of a steeper curve, with the 10-year up 2.9 basis points at 1.621 per cent. It touched 1.683 per cent last week, which was its highest since January of 2020.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.