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The Canadian dollar strengthened to a near three-month high against its U.S. counterpart on Monday as liquidity measures introduced by the Federal Reserve during the coronavirus crisis weighed on the greenback.

The Canadian dollar was trading 1.5 per cent higher at 1.3571 to the U.S. dollar, or 73.69 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3558.

“It just seems like everyone wants to sell (U.S.) dollars right now,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets. “The Fed has implemented many measures to make sure that the world is awash in U.S. dollars.”

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In March, when financial markets were crashing, the greenback was greatly sought after.

Global stocks rallied on Monday, bolstered by hopes of economic recovery. Canada runs a current account deficit and is a major producer of commodities, including oil, so the loonie tends to benefit from rising risk appetite.

“We’ve probably got enough juice to test the 1.34 handle in dollar-CAD,” Rai said

Canadian manufacturing activity contracted at a less severe pace in May than in April. The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 40.6 from a record low 33.0.

U.S. crude oil futures were up 0.3 per cent at $$35.60 a barrel, supported by reports that OPEC and Russia were closer to a deal on extending oil cuts.

Bleak domestic GDP data on Friday has been taken in stride by the market, with economists turning attention to how fast the economy can recover from the coronavirus crisis and the potential level of fiscal and monetary policy support.

A Bank of Canada interest rate decision is due on Wednesday, when Tiff Macklem will take over as governor.

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Canada’s 5-year yield was little changed at 0.394 per cent on Monday.

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