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The Canadian dollar CADUSD was little changed against the greenback on Wednesday, with the currency holding near a two-month high as recent dialling back of financial market volatility led to investors focusing more on the upswing in commodity prices.

The loonie was trading nearly unchanged at 1.2562 to the greenback, or 79.61 U.S. cents, after touching its strongest level since Jan. 21 at 1.2543.

“Financial markets seem to have put in a bottom postwar,” said Michael Goshko, senior market analyst at Convera Canada ULC.

“You are seeing the weight of the bounce in commodities begin to have its natural effect on commodity currencies.”

U.S. stock markets fell on Wednesday but were trading well above their February lows, while the price of oil, one of Canada’s major exports, settled 5.2% higher at $114.93 a barrel.

Canada on Thursday will outline plans to increase oil exports to help alleviate the tight global market following Russia’s invasion of Ukraine, but the hike will not undermine Ottawa’s long-term climate commitments, a government source said.

“It has been especially interesting to see currencies in general … do well in the face of increased hawkishness from the Fed this week,” Goshko said.

Federal Reserve Chair Jerome Powell has opened the door for hiking interest rates by more than 25 basis points at upcoming policy meetings, but money markets expect the Bank of Canada to keep pace with Fed tightening over the course of the year.

Both central banks are seen raising rates nearly 190 basis points further in 2022 after hiking this month for the first time since before the pandemic.

Canadian government bond yields eased across a flatter curve, tracking the move in U.S. Treasuries.

The 10-year rate fell 7.9 basis points to 2.340%, after earlier touching its highest intraday level since November 2018 at 2.443%.

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