The Canadian dollar CADUSD strengthened against its U.S. counterpart on Friday, adding to its gains for the week, as oil prices rebounded and recent evidence that inflation is cooling weighed on the greenback.
The loonie was trading 0.3 per cent higher at 1.3715 to the greenback, or 72.91 U.S. cents, after moving in a range of 1.3709 to 1.3770. For the week, the currency strengthened 0.6 per cent.
Gains for Canadian dollar came as the U.S. dollar posted one of its steepest weekly declines this year against a basket of major currencies, pressured by cooler-than-expected U.S. inflation data that reset market expectations for how soon the Federal Reserve will cut rates.
“The sentiment is, inflation is potentially starting to get under control, oil prices are up and that is a causing a bid to the loonie today,” said Rahim Madhavji, president at KnightsbridgeFX.com.
The price of oil, one of Canada’s major exports, rallied as investors who had taken short positions took profits, prompting a rebound in prices that slumped to four-month lows during the previous session. U.S. sanctions on some Russian oil shippers also lent support.
U.S. crude oil futures settled 4.1 per cent higher at $75.89 a barrel.
Domestic data showed that producer prices fell by 1.0 per cent in October from September on lower prices for energy and petroleum products, as well as softwood lumber.
Canada’s consumer price index report for October, due on Tuesday, could offer further evidence of cooling prices. Analysts expect CPI to fall to an annual rate of 3.2 per cent from 3.8 per cent in September.
Canadian government bond yields were mixed across a flatter curve. The 10-year was unchanged at 3.680 per cent after earlier touching its lowest level since Sept. 14 at 3.635 per cent.