TORONTO: The Canadian dollar strengthened against its US counterpart on Wednesday as crude prices surged to 2015 highs and the US dollar stumbled on soft economic data, but gains were well-off highs hit earlier in the session.
The big oil and greenback drivers appeared to overshadow any market reaction from an historic election in the oil-producing province of Alberta, in which the left-wing New Democrats won a crushing victory, ending the Progressive Conservatives' 44-year hold on power.
"The election is in the wings and removed from price action in the Canadian dollar," said Scott Smith, senior market analyst at Cambridge Global Payments in Calgary.
"I don't think it will affect things on a day to day level, but is an overall theme going forward. It will raise some caution in terms of generating further investments in the energy industry for Canada."
The price of crude, a significant Canadian export, has rebounded over the last month and gathered more steam on Wednesday after the American Petroleum Institute (API) reported that US crude stocks fell. But prices came off their highs as market participants took profits.
US crude was up 0.4 percent to $60.66 after hitting $62.58 a barrel earlier in the session, while Brent crude was unchanged at $67.55 after touching $69.63.
The Canadian dollar finished at C$1.2040 to the greenback, or 83.06 US cents, stronger than the Bank of Canada's official close of C$1.2072, or 82.84 US cents, on Tuesday.
The loonie had traded between C$1.1940, its strongest level since right before the Bank of Canada's surprise interest rate cut in January, and C$1.2087 during the session.
"People have a hard time selling US dollars at this level because the Canadian dollar is fairly overvalued," said Smith. "From a technical perspective, what we saw today was a bounce off a very strong technical level."
The greenback retreated after data showed private employers added 169,000 jobs in April, the fewest since January 2014 and far below economists' forecast for 200,000. This was the latest set of data that supported expectations that the Federal Reserve will postpone a rate hike.
Canadian government bond prices were mostly lower across the maturity curve, with the two-year price down 1 Canadian cent to yield 0.698 percent and the benchmark 10-year falling 70 Canadian cents to yield 1.815 percent.
The Canada-US two-year bond spread narrowed to 5.9 basis points, while the 10-year spread was -43.0 basis points.
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