Skip to main content

The Globe and Mail

Canadian dollar notches nine-day high against greenback as oil rallies

A loonie is pictured in North Vancouver, in April, 2014.

The Canadian dollar strengthened to a nine-day high against its U.S. counterpart on Wednesday as oil prices climbed and minutes from the Federal Reserve's most recent policy meeting weighed on the greenback.

The U.S. dollar fell against a basket of major currencies after data showed new orders for U.S.-made capital goods unexpectedly fell in October, and the Fed's November meeting minutes showed policymakers may be starting to question a December interest rate increase.

The price of U.S. crude oil reached $58 a barrel for the first time since July 2015 as the shutdown of one of the largest crude pipelines from Canada cut supply to the United States.

Story continues below advertisement

Oil is one of Canada's major exports.

"Everyone is looking at that key psychological level in crude, which is $60," said Blake Jespersen, managing director, foreign exchange sales at BMO Capital Markets. "And I think if we get there, USD-CAD is probably (going to trade) down through $1.25."

Strong inflows of foreign money into Canadian stocks and bonds this year are adding to investor confidence that the rally since May in the country's currency is sustainable because it is not just supported by speculative flows.

At 4 p.m. ET, the Canadian dollar was trading at $1.2702 to the greenback, or 78.73 U.S. cents, up 0.6 per cent.

The currency touched its strongest since Nov. 13 at $1.2697. Although activity was lighter than usual ahead of the U.S. Thanksgiving holiday on Thursday.

The loonie has been pressured recently by concern that an uncertain outlook for the North American Free Trade Agreement will stall Bank of Canada interest rate hikes.

The United States, Mexico and Canada failed to resolve any major differences in a fifth round of talks to rework the NAFTA trade deal, drawing a swift complaint from the Trump administration on Tuesday that the lack of progress could spell doom.

Story continues below advertisement

Canadian government bond prices were higher across the yield curve on Wednesday, although they lagged the rally in U.S. Treasuries.

Canada's two-year rose 1.5 cents to yield 1.455 per cent and the 10-year climbed 10 cents to yield 1.907 per cent.

The gap between Canada's two-year yield and its U.S. equivalent narrowed by 3.8 basis points to a spread of -27.6 basis points.

Canadian retail sales data for September is due on Thursday.

Report an error
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Please note that our commenting partner Civil Comments is closing down. As such we will be implementing a new commenting partner in the coming weeks. As of December 20th, 2017 we will be shutting down commenting on all article pages across our site while we do the maintenance and updates. We understand that commenting is important to our audience and hope to have a technical solution in place January 2018.

Discussion loading… ✨