TORONTO: The Canadian dollar made slight gains on Wednesday after two days of sharp losses against the US dollar, as investors continued to digest crude oil's decline to 2009 lows and jostled for position ahead of expected US monetary tightening.
The Canadian dollar ended the day trading at C$1.3564 to the greenback, or 73.72 US cents, slightly stronger than the Bank of Canada's official close of C$1.3587, or 73.60 US cents.
"The spike higher has almost been too fast, and we're likely to see some consolidative price action I think and a little bit of softness in the US dollar too," said Scott Smith, senior market analyst at Cambridge Global Payments in Toronto.
"The Canadian dollar has been at the mercy of oil for the last few trading sessions," he added. "That's been the main driver and likely will continue to be the driver until next week as we head into the Fed announcement."
The greenback lost ground against a string of major currencies as invested exited long US dollar positions ahead of the US Federal Reserve meeting next week, when the central bank is widely expected to hike rates for the first time in almost a decade.
Oil prices fell for a fourth day as the market ignored an unexpected drawdown in US crude stockpiles to focus on a build in distillates, including diesel, which came at twice the level expected.
The currency's strongest level of the session was C$1.3517, while its weakest level was C$1.3620.
Against the euro, the Canadian dollar weakened to C$1.4952, its weakest level in 10 weeks.
The Canadian dollar hit an 11-year low against the greenback on Tuesday, at C$1.3623, as a slump in crude oil prices to 2009 levels raised the prospect that Canada's central bank might have to take further accommodative measures.
Bank of Canada Governor Stephen Poloz said on Tuesday that rates could be pushed into negative territory if warranted, but the overall tone of the speech was not as dovish as some had expected following the plunge in crude oil prices, according to a research note from RBC Capital Markets.
Canadian government bond prices were higher across the maturity curve, with the two-year up 4.5 Canadian cents to yield 0.543 percent and the benchmark 10-year adding 15 Canadian cents to yield 1.488 percent.
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