The Canadian dollar firmed against the greenback on Wednesday, and led its commodity counterparts in outperforming key currencies, as investors dipped their toes back into riskier assets. The move came as some calm took hold in currency markets and North American equity markets rallied on upbeat data and Federal Reserve comments following a volatile start to the week on worries about China's economic growth.
The loonie's strength came even as the US dollar rebounded and the price of crude, a major Canadian export, fell nearly 2 percent, rupturing the currency's usually tight correlation with oil and the greenback. "It's been a bit of a puzzler for us too. It's the best performing still of the majors against the US dollar today," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
"In the last couple of days, it's been trading more as a risk proxy, so when the US dollar and equity markets are bouncing, Canada has been typically outperforming ... trading closer with equities markets, which is unusual for the Canadian dollar. " The Canadian dollar finished trading at C$1.3322 to the greenback, or 75.06 US cents, modestly stronger than the Bank of Canada's official close of C$1.3346, or 74.93 US cents on Tuesday. The currency traded between C$1.3252 and C$1.3350 throughout the session, as external drivers dictated the loonie's direction in the absence of domestic economic data this week.