TORONTO: The Canadian dollar strengthened against the greenback on Wednesday despite lower oil prices and uncertainty ahead of looming events such as Thursday's OPEC meeting and Friday's release of Canadian gross domestic product figures.
The currency, which often follows movements in oil prices, rose even though the price of crude fell on expectations that OPEC (the Organization of the Petroleum Exporting Countries) members will not take drastic action to tighten the market when they gather for a highly anticipated meeting in Vienna.
US crude oil futures settled down 40 cents at $73.69.
Ken Wills, a currency strategist and broker at CanadianForex in Toronto, said the Canadian currency's link with oil prices may have loosened.
"That oil correlation seems to have let off a little bit," he said, noting there has been increasing talk among Canadian oil sands producers that efficiencies are helping lower how much a barrel of crude must cost for them to stay profitable.
"They're down to, some are saying $40, some are saying $65 a barrel. I think that has unhinged things a little bit for Canada," he said.
The Canadian dollar closed Wednesday's session at C$1.1236 to the greenback, or 89.00 US cents, compared with Tuesday's finish of C$1.1253, or 88.87 US cents.
Canadian third quarter GDP figures are due on Friday. Statistics Canada has reported some robust economic data for the month of September, and economists forecast GDP growth of 2.1 percent for the quarter at an annualized rate.
An extremely thin market is expected for the rest of the week due to the US Thanksgiving Day holiday on Thursday, which could result in more market volatility, analysts said. Wills said the volatility could spur the currency to challenge the C$1.1225 level or even the C$1.1185.
"I think the biggest set-up for a sharp move would be what if the (GDP) data disappoints," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. Canadian government bond prices were higher across the maturity curve, with the two-year adding half a Canadian cent to yield 1.041 percent and the benchmark 10-year climbing 12 Canadian cents to yield 1.933 percent.
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