The Canadian dollar CADUSD extended recent gains against the U.S. dollar on Thursday as Wall Street rallied, with the move raising pressure on speculators that have built large short positions in the currency.
The loonie was trading 0.6 per cent higher at 1.3287 to the greenback, or 75.26 U.S. cents, its strongest level since Aug. 2.
“A recovery in U.S. stocks has caused the USD to give back all of yesterday’s gains and more, with the risk-on backdrop taking USD-CAD lower in the process,” said George Davis, chief technical strategist at RBC Capital Markets.
The U.S. dollar lost ground against a basket of major currencies and Wall Street recouped much of the previous day’s decline as economic data fuelled optimism that the Federal Reserve would ease monetary policy.
Speculators have trimmed their bearish bets on the Canadian dollar after raising them in November to the highest in six years.
“There’s clearly pain. Funds are getting out of short positions that are just not working,” said Erik Bregar, director, FX & precious metals risk management, at Silver Gold Bull.
Canadian retail sales rose by 0.7 per cent in October from September, and were up even more in volume terms, but a preliminary estimate for November was less upbeat, showing no growth.
The price of oil, one of Canada’s major exports, fell after Angola said it would exit the Organization of the Petroleum Exporting Countries, raising questions about the producer group’s efforts to limit global supplies. U.S. crude futures settled 0.4 per cent lower at $73.89 a barrel
Canadian bond yields rose across the curve, with the 2-year up 4.4 basis points at 3.952 per cent.
The gap between it and its U.S. equivalent narrowed by 6.3 basis points to roughly 40 basis points in favour of the U.S. note, the narrowest since Nov. 16.