TORONTO: After jumping 2.5 percent over the first two days of the week, the Canadian dollar dropped against its US counterpart on Wednesday as oil prices gave back some of their recent gains due to new builds in US crude stock levels.
Battered oil prices had rebounded some 19 percent since Thursday, giving the commodities-linked Canadian dollar a big lift. Canada is a major exporter of oil and its currency has been especially sensitive over the last seven months to crude prices, which have fallen on too much supply and output, and not enough demand.
US crude futures were trading below C$52 a barrel on Wednesday, after an industry report showed US crude stocks rose by more than 6 million barrels last week.
"All those markets, after a real hard reversal, they're settling down," said Greg Anderson, global head of foreign exchange strategy in New York BMO Capital Markets.
"Oil is off a couple of dollars, so no surprise that USD/CAD's moved back up towards C$1.25. I think that's about the level where it would settle down."
At 9:40 a.m. ET (1440 GMT), the Canadian dollar was at C$1.2482 to the greenback, or 80.12 US cents, softer than Tuesday's close of C$1.2396, or 80.67 US cents.
The loonie is expected to stay around current levels until at least Friday, when January employment figures from the United States and Canada are released. Canadian trade data for December, due on Thursday, could also provide direction.
Canadian government bond prices were mostly weaker across the maturity curve, with the two-year off 1.5 Canadian cents to yield 0.439 percent and the benchmark 10-year slipping 28 Canadian cents to yield 1.338 percent.
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