TORONTO: The Canadian dollar strengthened against the US currency on Tuesday, helped by soft US data that weighed on the greenback and a slight recovery in the price of oil.
The US dollar fell against a range of currencies as US durable goods and home price data disappointed investors and raised worries about the economy as Federal Reserve officials began a two-day policy meeting.
"The Canadian dollar is benefiting from US dollar weakness, number one. Number two, oil is showing a little bit of life after a dismal month," said Adam Button, a currency analyst at ForexLive in Montreal.
Crude oil prices closed higher, with Brent finishing just above $86 a barrel after two straight days of losses, helped by a rally on Wall Street.
"Oil has been one of the key drivers of markets generally ... and typically that's usually a fairly good environment for the Canadian dollar," said Camilla Sutton, chief currency strategist at Scotiabank.
"But the broad picture is that the Canadian dollar has really been stuck in a range, a lot of currencies have, trying to look for where the next shift is going to be, and with the Fed meeting tomorrow, that puts a big risk in the horizon."
While the Fed is expected to announce the end of its bond-purchase program at the conclusion of its two-day meeting, the US central bank will likely reinforce its willingness to wait a while before raising interest rates.
The Canadian dollar closed at C$1.1171 , or 89.52 US cents, stronger than Monday's North American session close at C$1.1238, or 88.98 US cents.
At home, traders are looking ahead to testimony by Bank of Canada Governor Stephen Poloz to the Senate banking committee on Wednesday. His testimony had been scheduled for last week but was canceled due to a gunman's attack on Parliament Hill.
"Poloz is always a major risk for Canadian dollar traders. The Bank of Canada has been extremely disciplined in terms of sending a message of patience on rates and on the economy. That will continue to be the case tomorrow," said Button.
The central bank has kept its main policy rate at 1 percent since September 2010.
Canadian government bond prices were mostly weaker, with the two-year down nearly 2 Canadian cents to yield 1.01 percent. The benchmark 10-year was down 14 Canadian cents to yield 2.03 percent.
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