Canadian dollar steadies near three-week high as oil rally extends

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar was unchanged against its U.S. counterpart on Wednesday, holding near its strongest level in nearly three weeks as oil extended its winning streak and the greenback broadly declined.

The loonie was unchanged at 1.2693 to the greenback, or 78.78 U.S. cents, having touched its strongest intraday level since Jan. 22 at 1.2667.

“USD-CAD continues to be driven by ever higher oil prices, and an abrupt turnaround in the greenback’s fortunes since late last week,” Ronald Simpson, managing director global currency analysis at Action Economics, said in a note.

The price of oil, one of Canada‘s major exports, rose for a ninth day, its longest winning streak in two years, supported by producer supply cuts and hopes that vaccine rollouts will drive a recovery in demand.

U.S. crude oil futures settled 0.6% higher at $58.68 a barrel, while the U.S. dollar fell to a two-week low against a basket of major currencies as data showing tame U.S. inflation weighed on Treasury yields.

Canada‘s 10-year was unchanged at 0.998%, pulling back from its highest intraday level since March last year at 1.028%.

Ontario, one of the world’s biggest sub-sovereign debtors, said it would increase spending on hospitals and small businesses during the coronavirus pandemic as the province maintained its forecast for a record budget deficit in the current fiscal year.

The pandemic has added urgency to the Bank of Canada‘s development of a digital currency and a decision could come sooner than previously thought, Bank of Canada Deputy Governor Timothy Lane said, although he noted that a launch was not a “foregone conclusion.”

(Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney)