By Fergal Smith
TORONTO (Reuters) -The Canadian dollar advanced against its broadly weaker U.S. counterpart on Monday as robust U.S. economic data bolstered investor sentiment and ahead of a potential reduction by the Bank of Canada of its bond purchases later this month.
The loonie was trading 0.4% higher at 1.2521 to the greenback, or 79.87 U.S. cents, having touched its strongest intraday level since March 22 at 1.2501.
“I think we stay relatively well supported, at least until we get some sense of what the Bank of Canada is thinking later in the month,” said Shaun Osborne, chief currency strategist at Scotiabank.
Strategists from Canada‘s six largest banks expect the central bank to announce at its interest rate decision on April 21 that it is cutting the amount of bonds it buys each week to C$3 billion from C$4 billion.
If the BoC were to reduce its bond purchases, it could “balance that out with some sort of dovish messaging that says that rates aren’t going to move up anytime soon,” Osborne said.
Speculators have raised their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of March 30, net long positions had increased to 6,518 contracts from 5,103 in the prior week.
Wall Street’s main indexes climbed, with the S&P 500 and the Dow posting record highs as investors cheered strong jobs and services sector reports. Canada sends about 75% of its exports to the United States, including oil.
U.S. crude oil futures settled 4.6% lower at $58.65 a barrel, pressured by rising supply from OPEC+ and higher Iranian output, while the U.S. dollar gave back some recent gains against a basket of major currencies.
Canadian government bond yields were higher across a steeper curve, with the 10-year up nearly 5 basis points at 1.562%.
(Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney)
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