TORONTO: The Canadian dollar rallied against its US counterpart on Tuesday, its fourth strong gain in five sessions, supported by a recovery in oil prices on hopes a deal could be reached to address a global crude supply glut.
The loonie, as the Canadian currency is colloquially known, last week hit its weakest level since 2003, but has gained since Wednesday's decision by the Bank of Canada to hold off on cutting rates and as oil prices push back above $30 a barrel.
"We're taking our cues from commodity prices," said Don Mikolich, executive director of foreign exchange sales at CIBC Capital Markets.
Crude surged after the Organization of the Petroleum Exporting Countries (OPEC) renewed calls for rival producers to cut supply alongside its members, but Russia, seen as key to any deal, has resisted so far.
Mikolich said that the currency could struggle to push below C$1.40 but that stronger signs that oil supply will be curtailed could help the loonie strengthen as far as C$1.35.
The Canadian dollar settled at C$1.4075 to the greenback, or 71.05 US cents, at the stronger end of its C$1.4045 to C$1.4326 range in the session, and stronger than Monday's official close of C$1.4270, or 70.08 US cents.
US Federal Reserve policymakers meet on Tuesday and Wednesday for the first time since raising interest rates in December. While no move is expected, investors will parse their statement to see how recent events have influenced the central bank's outlook.
Canadian government bond prices were lower across the maturity curve as the rise in crude oil prices supported the domestic economic outlook.
The two-year price was down 5.5 Canadian cents to yield 0.435 percent and the benchmark 10-year fell 23 Canadian cents to yield 1.269 percent.
The Canada-US 10-year bond spread was 4.8 basis points less negative at -72.9 basis points as Canadian government bonds underperformed.
Canadian gross domestic product for November is awaited on Friday, expected to reveal a rebound in growth after contraction in October.
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