TORONTO: The Canadian dollar jumped more than a cent against its US counterpart on Monday as oil prices recovered some of their recent heavy losses and allowed the currency to regain all the ground it lost on Friday.
Canada is a major oil exporter and its currency is exposed to crude prices, which have fallen for five straight months. Prices sank to new five-year lows early on Monday following OPEC's decision last week not to cut crude production, but they then rebounded with their biggest daily gain since 2012.
"We've had oil come well off its lows, having reached brand new lows this morning and then retraced more half of its losses from Friday," said Camilla Sutton, chief currency strategist at Scotiabank.
"From its low today to where it's closing, oil is up a substantial 9 percent. So it's had a very big day. On the back of that CAD's done very well ... and able to retrace a lot of those earlier losses."
The Canadian dollar was at C$1.1328 to the greenback, or 88.28 US cents, much stronger than Friday's finish of C$1.1440, or 87.41 US cents.
Earlier in the session, it touched C$1.1459, or 87.27 US cents, just shy of the C$1.1466 it hit more than three weeks ago, which was the currency's weakest level since July 2009.
With oil prices still an overall drag, however, the Canadian dollar is expected to remain under pressure.
"If anything, what last week's price action should be telling the market, especially for US dollar buyers, is that there's more weakness ahead for the loonie," said Brad Schruder, director of foreign exchange sales at BMO Capital Markets.
This week, investor attention will turn to a slew of central bank decisions around the world, including a Bank of Canada policy statement on Wednesday. There is also some key economic data, culminating in US and Canadian labor market figures for November on Friday.
"It's an extremely busy week with plenty to chew on as far as direction from central banks and economic underpinnings," Schruder said.
Canadian government bond prices were mostly lower across the maturity curve, with the two-year down 1 Canadian
cent to yield 0.989 percent and the benchmark 10-year off 44 Canadian cents to yield 1.896 percent.
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