TORONTO: The Canadian dollar extended its recent gains against its US counterpart on Tuesday as continued weakness in the greenback lifted dollar-priced crude oil, a key Canadian export, and other commodities.
Speculation since last week's US Federal Reserve statement that the Fed might delay hiking interest rates has put the US currency under pressure.
"The general trend here is probably still geared toward US dollar softening a bit more," said Shaun Osborne, chief currency strategist at TD Securities.
"The selloff in the US dollar post-FOMC was quite telling overall from a price action point of view. It does suggest we've probably seen a bit of a peak in the US dollar here."
The greenback briefly pared losses against a basket of currencies after data showed US consumer prices rebounded in February, with gasoline prices rising for the first time since June.
But it then retraced earlier losses and sent Brent crude above $56 a barrel, and US crude up just under $48 a barrel, despite signs of slowing economic growth in China as well as Saudi Arabian comments that the country's oil production is closing in on a record high.
The Canadian dollar was at C$1.2482 to the greenback, or 80.12 US cents, at 9:18 a.m. (1318 GMT), modestly stronger than Monday's Bank of Canada close of C$1.2499, or 80.01 US cents.
Earlier in the session, it touched C$1.2428, or 80.36 US cents, and Osborne speculated in the coming days, the loonie could test highs hit in February, when it strengthened to the mid-C$1.23 level.
With little on the domestic data front until next week, a speech by Bank of Canada Governor Stephen Poloz on Thursday will be a key focus for market watchers.
"Given the growth challenges we're likely to see for the Canadian economy, it's quite likely rates will have to move a little bit lower at least," Osborne said. "That is going to be drag on Canadian dollar performance, but not for the moment," he added, noting that the central bank will likely wait until first quarter data is released in May before moving on rates.
Canadian government bond prices were mostly lower across the maturity curve, with the two-year down 1 Canadian cent to yield 0.461 percent and the benchmark 10-year flat, yielding 1.308 percent.
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