C$ rebounds from 10-day low as risk appetite recovers

TORONTO: The Canadian dollar strengthened against its US counterpart on Thursday, rebounding from an earlier 10-day low, as investor appetite for risk recovered and after the Bank of Canada raised interest rates on Wednesday for the second time this year.

At 8:41 a.m. EDT (1241 GMT), the Canadian dollar was trading 0.5 percent higher at C$1.3150 to the greenback, or 76.05 US cents. The currency touched its weakest intraday since July 2 at C$1.3218.

Stocks and commodity markets rose, having suffered tailspins in the previous session as the United States ratcheted up trade war threats on China.

Canada exports many commodities, including oil, and runs a current account deficit so its economy could be hurt if the flow of trade or capital slows.

US crude oil futures rose 0.9 percent to $71.01, recouping some ground after sharp losses the previous session when Libya said it would resume oil exports.

The Bank of Canada raised its benchmark interest rate on Wednesday by 25 basis points to 1.50 percent and signaled more rate hikes to come, saying that while mounting trade tensions with the United States were a concern, their impact on growth and inflation looked modest so far.

Money markets see a 65 percent chance of another hike by December.

Canadian home prices rose in June from May, the fourth straight rise after weakness late last year, returning national prices to just barely above the previous peak in August 2017, the Teranet-National Bank Composite House Price Index showed.

Separate data from Statistics Canada showed that new home prices in Canada were flat in May for a third month in a row. On a year-on-year basis, prices were up 0.9 percent.

Canadian government bond prices were lower across the yield curve in sympathy with US Treasuries after US data pointed to a steady buildup of inflation pressures that could keep the Federal Reserve on a path of gradual interest rate increases.

The two-year fell 3 Canadian cents to yield 1.969 percent and the 10-year             declined 15 Canadian cents to yield 2.168 percent.

On Wednesday, the 2-year yield touched its highest in nearly seven weeks at 1.977 percent.