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The Canadian dollar strengthened to a three-month high against its U.S. counterpart on Wednesday as investors bet on economic recovery and the Bank of Canada reduced the frequency of some emergency operations it introduced to support financial markets.

The central bank held its key overnight interest rate steady and said the impact of the coronavirus pandemic on the global economy appears to have peaked, while the Canadian economy seems to have avoided worst-case projections.

It said it would reduce the frequency of its term repo operations to once per week, and its program to purchase bankers’ acceptances to bi-weekly operations.

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World shares reached three-month highs as a closely watched survey of service sector activity in China recovered to preepidemic levels in May.

Commodity-based currencies, such as the Canadian dollar, “have tended to rally recently with just a better outlook of increased growth coming out of the lockdowns,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada.

The price of oil, one of Canada’s major exports, fell after touching its highest since March as doubts emerged about the timing and scale of a potential extension to the oil supply pact between major producers. U.S. crude oil futures fell 0.2 per cent to trade at $36.75 a barrel.

The Canadian dollar was trading 0.2 per cent higher at 1.3487 to the greenback, or 74.14 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3476. It has rallied nearly 9 per cent since hitting a four-year low in March.

Canadian labour productivity rose 3.4 per cent in the first quarter, the largest quarterly increase recorded, as hours worked fell faster than business output, Statistics Canada said. Canada’s jobs report for May is due on Friday.

Canadian government bond yields rose across a steeper yield curve, with the 10-year yield up 6.6 basis points at 0.608 per cent.

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