TORONTO: The Canadian dollar strengthened against its US counterpart on Monday as economic data weighed on the greenback, while Canada's finance minister was optimistic that deficit spending will spur higher domestic economic growth.
The US dollar hit session lows against a basket of major currencies after a deep downward revision to US consumer spending for January.
Canada's Liberal government believes the federal budget will be balanced in "about" five years due to higher growth spurred by deficit spending, Finance Minister Bill Morneau said on Sunday.
The government gave no target date for eliminating the deficit when it unveiled the budget last week.
The stimulus budget, combined with a modest recovery in oil and non-commodity exports, makes it likely the Bank of Canada's next move will be an interest rate hike rather than a cut.
At 9:53 a.m. EDT (1353 GMT), the Canadian dollar was trading at C$1.3186 to the greenback, or 75.84 US cents, stronger than Friday's close of C$1.3240, or 75.53 US cents.
The currency's weakest level was C$1.3286, while it touched its strongest since March 23 at C$1.3183.
Oil prices turned lower in thin Easter holiday trading. US crude prices were down 0.43 percent to $39.29 a barrel.
Canadian government bond prices were lower across the maturity curve, with the two-year price down 0.5 Canadian cent to yield 0.568 percent and the benchmark 10-year falling 4 Canadian cents to yield 1.276 percent.
The Canada-US 10-year spread was 0.6 of a basis point less negative at -61.5 basis points as Canadian government bonds slightly underperformed.
January gross domestic product data is awaited on Thursday. Analysts expect 0.3 percent growth for the month, which would reinforce expectations that first-quarter growth will exceed the Bank of Canada's 1 percent forecast.
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