TORONTO: The Canadian dollar firmed against the greenback on Wednesday, bouncing off the more than five-year low it hit earlier in the session as a drop in oil prices was offset by weaker-than-expected US economic data.
Bond yields were also caught up in the global market rout, with the yield on the benchmark 10-year Canadian government bond at its lowest since May 2013.
Concerns about heavy oversupply sent US crude down 36 cents to $81.84 a barrel, though the commodity moved off its lows for the day, further helping the Canadian dollar.
As an oil exporter, Canada's currency is often sensitive to the price of the commodity.
The Canadian dollar has shed about 6 percent since July as it has suffered from a rally in the US dollar as the US Federal Reserve winds down its stimulus program and moves closer to raising interest rates.
Losses accelerated on Tuesday, sparked by a steep drop in oil prices and worries about the health of the global economy.
The loonie racked up a new low for 2014 in early morning trading before clawing back its losses, but analysts expect the currency's momentum is still to the downside.
"I wouldn't bet against it getting weaker," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada in Toronto.
"We have C$1.15 at the end of the year and we're getting there quick."
The Canadian dollar was at C$1.1265 to the greenback, or 88.77 US cents, stronger than Tuesday's close of C$1.1306, or 88.45 US cents.
The loonie touched a session low of C$1.1385, its lowest level since July 2009. But it was able to recover as the greenback was hit by disappointing US retail sales and producer price figures.
The US dollar shed more than 1 percent against a basket of currencies.
Canadian government bond prices were higher across the maturity curve, with the two-year up 16-1/2 Canadian cents to yield 0.901 percent, its lowest level since June 2012.
The benchmark 10-year was up C$1.15 to yield 1.817 percent.
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