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The Canadian dollar strengthened against its U.S. counterpart on Tuesday, buoyed by rising investor sentiment and data showing an unexpected jump in housing starts, but the loonie gave back some of its gains as shares on Wall Street ended lower.

The loonie got a lift from “the general risk optimism in the market place,” said Amo Sahota, director at Klarity FX in San Francisco.

The S&P 500 approached a record high before reversing course late in the session as comments by U.S. Senate Republican leader Mitch McConnell suggested a stalemate in talks over a fiscal stimulus deal.

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Canada runs a current account deficit and is a major exporter of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.

U.S. crude oil futures settled 0.8% lower at $41.61 a barrel, weighed by profit-taking ahead of weekly U.S. oil inventory data.

Canadian housing starts rose 15.8% to 245,604 units in July as the market continued to bounce back from the COVID-19 crisis. Economists had expected starts to dip to 210,000.

“Generally, economic data from Canada has been outperforming” in recent weeks and that has supported the loonie, Sahota said.

The Canadian dollar was trading 0.3% higher at 1.3307 to the greenback, or 75.15 U.S. cents. The currency, which last Wednesday notched a five-month high at 1.3229, traded in a range of 1.3270 to 1.3361.

Canadian Prime Minister Justin Trudeau said he had “full confidence” in Finance Minister Bill Morneau amid reports of a clash over policy between the two men.

Ottawa is rolling out more than C$300 billion of economic support in response to the coronavirus crisis.

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Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries. The 10-year was up 7.1 basis points at 0.566%.

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