TORONTO: The Canadian dollar strengthened to a fresh 3-1/2-month high against its broadly weaker US counterpart on Wednesday, extending this week's gains for the loonie after the Bank of Canada signaled that higher interest rates lie ahead.
Chances of a rate hike this year have surged to more than three-in-four after hawkish comments this week from central bank officials, including Governor Stephen Poloz. Chances were less than one-in-four before stronger-than-expected jobs data on Friday.
Strengthening of the currency could put pressure on often-leveraged speculators to cover short positions, which had reached a record high, and accelerate any gains in the loonie.
At 9:44 a.m. ET (1344 GMT), the Canadian dollar was trading at C$1.3184 to the greenback, or 75.85 US cents, up 0.4 percent.
The currency's weakest level of the session was C$1.3245, while it touched its strongest since Feb. 28 at C$1.3165.
Gains for the loonie came even as prices of oil, one of Canada's major exports, fell after data showed a build in US crude stocks and OPEC reported a rise in its production despite a pledge to cut supply.
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