The Canadian dollar CADUSD strengthened against its U.S. counterpart on Monday, rebounding from its lowest level in more than two years, as oil prices jumped and despite domestic data showing a second straight month of declining factory activity.
The price of oil, one of Canada’s major exports, rose as OPEC+ considers reducing output by more than 1 million barrels per day (bpd) to buttress prices with what would be its biggest cut since the start of the COVID-19 pandemic.
U.S. crude prices were up 5.8 per cent at $84.12 a barrel.
Wall Street’s main indexes also advanced and bond yields fell as British Prime Minister Liz Truss reversed a cut to the highest rate of income tax that helped spark turmoil in financial markets.
Canadian manufacturing activity contracted for a second straight month in August as higher borrowing costs and an uncertain economic outlook contributed to a drop in new orders, but the pace of decline lessened, data showed.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 49.8 in September after falling to 48.7 in August, its lowest level since June 2020.
The Canadian dollar was up 1 per cent at 1.3692 to the greenback, or 73.04 U.S. cents, its biggest advance since May 13.
It traded in a range of 1.3670 to 1.3825, after touching on Friday its weakest intraday level since May 2020 at 1.3838.
Canada’s jobs report for September, due on Friday, could offer more clues on the strength of the domestic economy, while Bank of Canada Governor Tiff Macklem is due to speak on Thursday.
Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries and British government bonds. The 10-year eased 7.3 basis points to 3.097 per cent.