The Canadian dollar strengthened against its U.S. counterpart on Thursday, adding to its gains the day before, as investors bet that commodity producing economies will take up the slack left by disruptions to Russia’s exports.
The loonie rose 0.3% to 1.2760 per greenback, or 78.37 U.S. cents, after trading in a range of 1.2751 to 1.2841. On Tuesday, the currency touched its weakest intraday level in 2-1/2 months at 1.2901.
The only other G10 currencies to gain ground on Thursday were the Australian and New Zealand dollars. Canada, Australia and New Zealand are major producers of commodities.
“Many people see the commodity story as a key driver right now,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
“Going forward, countries are going to need to replace the huge supply that Russia and Ukraine and maybe even Belarus have.”
Russia is one of the world’s biggest energy producers, and both it and Ukraine are among the top exporters of grain.
Oil, a key export for Canada, settled 2.5% lower at $106.02 a barrel but other commodities, such as gold and copper gained ground.
Gains for the loonie came despite losses on Wall Street, as data showed U.S. inflation climbing to a four-decade high, all but assuring the U.S. Federal Reserve would hike key interest rates at the conclusion of next week’s monetary policy meeting.
The Bank of Canada raised interest rates last week for the first time in three years. Canada’s jobs report for February, due on Friday, can help guide expectations for further tightening next month.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year touched its highest since Feb. 25 at 1.968% before dipping to 1.948%, up 4.5 basis points on the day.
(Reporting by Fergal Smith; editing by Jonathan Oatis)
