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The Canadian dollar CADUSD on Thursday strengthened for a third day against its U.S. counterpart as global financial markets stabilized and the greenback lost ground against a basket of major currencies.

The loonie was trading 0.4 per cent higher at 1.2461 to the greenback, or 80.25 U.S. cents, after touching its strongest level since Nov. 10 at 1.2458.

The currency is “taking advantage of the broader weakness in the USD as well as firm crude oil prices,” strategists at Scotiabank, including Shaun Osborne, said in a note.

Adding to support for the loonie, markets are “not ruling out” a Bank of Canada interest rate hike later this month, the strategists said.

Canada’s central bank is due to make a policy announcement and update its economic forecasts on Jan. 26. It has not hiked rates since October 2018.

Major equity bourses globally held their ground and the U.S. dollar fell after the highest U.S. inflation reading in nearly 40 years was taken in stride by investors.

Investors have been worried about faster-than-expected monetary policy tightening by the Federal Reserve but sentiment improved after Fed Chair Jerome Powell on Tuesday said it may take several months to make a decision on running down the central bank’s $9-trillion balance sheet.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to moves in risk appetite.

Oil prices eased but remained near two-month highs, buoyed by expectations that a strong economic recovery will boost demand. U.S. crude prices were down 0.2 per cent at $82.45 a barrel.

Canadian government bond yields were mixed across a flatter curve, with the 10-year down 1.3 basis points at 1.724 per cent. On Monday, it touched its highest level in more than six weeks at 1.753 per cent.

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