TORONTO: The Canadian dollar strengthened to a nearly three-week high against its US counterpart on Thursday as oil prices climbed and prospects improved for greater deal making in Canada’s energy sector.
The price of oil, one of Canada’s major exports, was supported by potential disruption to oil flows from major exporter Iran in the face of US sanctions.
US crude oil futures settled 0.3 percent higher at $71.36 a barrel. They have rallied more than 5 percent from Tuesday’s low.
“Oil is what’s driving the Canadian dollar at the moment,” said Adam Button, currency analyst at ForexLive. “Today it is not just higher oil prices but there are indications of deal making in the energy industry.”
Enbridge Inc , a major Canadian oil pipeline company, may sell more assets than expected this year, seeing strong interest from potential buyers after achieving a goal this week for 2018 divestitures.
Crude has been trading far removed from levels needed to affect investment in Canada’s energy sector. But that could change as oil moves above $70 a barrel.
At 4 p.m. EST (2000 GMT), the Canadian dollar was trading 0.7 percent higher at C$1.2763 to the greenback, or 78.35 US cents. The currency touched its strongest level since April 20 at C$1.2743.
The loonie has rebounded as much as 2 percent since hitting on Tuesday a nearly seven week low at C$1.2998.
The US dollar fell on Thursday against a basket of major currencies, holding below its 2018 peak, as a smaller-than-expected rise in consumer prices caused traders to pare positions betting that inflation is accelerating, which could push the Federal Reserve to hike interest rates faster.
Canadian new home prices were unchanged in March, as expected, as higher prices in Ottawa were offset by a weaker Toronto market, data from Statistics Canada showed.
Canadian government bond prices were lower across a flatter yield curve, with the two-year down 3.5 Canadian cents to yield 1.977 percent and the 10-year falling 4 Canadian cents to yield 2.398 percent.
The 10-year yield touched its highest intraday since May 2014 at 2.411 percent.
Canada’s jobs report for April is due on Friday.
Source: Brecorder
