The Canadian dollar climbed to a one-week high against a broadly weaker greenback on Tuesday, boosted by higher oil prices and upbeat comments by Bank of Canada Governor Stephen Poloz, but the currency lost ground in April for the third straight month.
At 4:38 p.m., the Canadian dollar was trading 0.5 per cent higher at 1.3391 to the greenback, or 74.68 U.S. cents.
The currency touched its strongest level since April 23 at 1.3382. For April, the loonie was down 0.3 per cent, following declines in February and March but a strong performance in January.
The Canadian economy faces some headwinds but there was good reason to believe growth would accelerate in the second half of this year, Poloz told the House of Commons finance committee.
“Poloz, today in his testimony, definitely walked back some of the pessimistic sentiment that was embedded in their previous rate statement,” said Scott Smith, managing partner at Viewpoint Investment Partners.
Last week, the Bank of Canada held interest rates steady at 1.75 per cent as it slashed its gross domestic product growth forecast for the year to 1.2 per cent from 1.7 per cent in January.
Canada’s central bank is buying time for the economy to exit a soft patch without the aid of lower interest rates, economists say, by forecasting growth so weak it would take a surprise blow to activity for the economy to undershoot its estimates.
Canada’s gross domestic product fell by 0.1 per cent in February from January, data showed on Tuesday, falling short of analysts’ estimates of no change.
The price of oil, one of Canada’s major exports, rose as Venezuela’s opposition leader called on the military to back him to end Nicolas Maduro’s rule. U.S. crude oil futures settled up 0.7 per cent at $63.91 a barrel.
The U.S. dollar fell against a basket of major currencies ahead of a Federal Reserve interest rate decision on Wednesday, as data showing stronger-than-expected first-quarter growth numbers for the euro zone boosted the euro.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries, with the 10-year rising 9 cents to yield 1.713 per cent.
The gap between Canada’s 10-year yield and its U.S. equivalent narrowed by 2.1 basis points to a spread of 79.2 basis points in favor of the U.S. bond.