TORONTO: The Canadian dollar strengthened on Monday to more than a two-week high against its US counterpart as the price of oil, one of Canada's major exports, jumped after major producers took a step toward extending a supply-cut deal.
US crude prices were up 3.57 percent at $49.55 a barrel after top exporter Saudi Arabia and Russia said supply cuts led by the Organization of the Petroleum Exporting needed to last into 2018, longer than originally agreed.
The Canadian dollar's historically close link to oil has become stronger in recent weeks. The three-month rolling correlation between the loonie and oil reached 0.75, its highest since September.
The loonie's gains came after Bank of Canada Governor Stephen Poloz told the Globe and Mail over the weekend that problems at alternative lender Home Capital Group are contained but that the sharp rise in Canadian home prices and its possible impact on the financial system is a primary concern for the central bank.
Investor worries about how the troubles of Home Capital could affect the country's real estate market have weighed recently on the Canadian dollar.
Resales of Canadian homes fell 1.7 percent in April from record highs in March as new listings spiked, the Canadian Real Estate Association said in a report on Monday that suggested a long-awaited slowdown in housing has begun.
At 9:23 a.m. ET (1323 GMT), the Canadian dollar was trading at C$1.3626 to the greenback, or 73.39 US cents, up 0.6 percent, according to Reuters data.
The currency's weakest level of the session was C$1.3720. It touched its strongest level since April 27 at C$1.3601.
Earlier this month, the loonie hit its weakest level in 14 months at C$1.3793, pressured by depressed oil prices and a more uncertain trade outlook with the United States.
Speculators have ramped up bearish bets on the Canadian dollar to the highest levels seen since 1995, data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian dollar net short positions surged to 86,215 contracts as of May 9 from 47,704 a week earlier.
Canadian government bond prices were lower across the yield curve, with the two-year down 2 Canadian cents to yield 0.691 percent and the 10-year falling 11 Canadian cents to yield 1.586 percent.
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