Canadian dollar rebounds from one-week low as oil climbs
The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices rose, but the move was limited as investors contended with increased trade uncertainty.
The loonie was trading 0.2% higher at 1.4085 per U.S. dollar, or 71.00 U.S. cents, clawing back some ground after hitting a one-week low of 1.4111 on Tuesday.
“The move was helped by firmer Canadian bond yields relative to U.S. Treasuries, but it still looks more like a modest correction than the start of a sustained rally,” said Tony Valente, senior FX dealer at AscendantFX.
“The loonie remains largely at the mercy of U.S. dollar sentiment, oil prices, relative rate expectations and ongoing trade uncertainty with the U.S., so unless those drivers shift more decisively, gains are likely to stay limited,” Valente said.
Domestic data on Monday showed inflation cooling more than expected last month while the U.S. imposed 50% tariffs on a wide range of Canadian goods.
The price of oil, one of Canada’s major exports, rose to its highest level in almost six weeks on mounting concerns about disruptions to Middle Eastern supply routes because of escalating hostilities between the U.S. and Iran and threats to shipping by the Iran-backed Houthi militia in Yemen.
U.S. crude oil futures were trading 2.3% higher at $86.24 a barrel, while the U.S. dollar dipped from a one-week high against a basket of major currencies as traders gauged the likelihood of Bank of Japan intervention in the yen.
Canadian retail sales data for May, due on Thursday, could add to recent evidence of the economy rebounding in the second quarter. Economists expect an increase of 1%.
Canadian government bond yields moved higher across the curve. The 10-year was up 2 basis points at 3.582%, after earlier touching its highest level since May 21 at 3.602%.
