TORONTO: The Canadian dollar strengthened against its US counterpart on Thursday as oil rallied and stocks rose, while investors turned attention to upcoming jobs data in the US and Canada.
The strengthening of the loonie comes one day after it plunged to a two-week low of C$1.2886, pressured by weak domestic trade data and a wildfire that cut production in Canada's oil sands region.
Supportive of the risk-sensitive commodity-linked currency, US and Canadian stocks opened higher, while oil rallied.
US crude prices were up 4.34 percent to $45.68 a barrel as Canadian production cuts and escalating tensions in Libya stoked concern among investors over a near-term supply shortage.
At 9:30 a.m. EDT (1330 GMT), the Canadian dollar was trading at C$1.2810 to the greenback, or 78.06 US cents, stronger than Wednesday's close of C$1.2870, or 77.70 US cents.
The currency's strongest level of the session was C$1.2787, while its weakest was C$1.2874.
The loonie has rallied more than 14 percent since hitting a 12-year low of C$1.4689 in January. However, analysts expect the currency will not be able to hold on to all of those gains.
Weaker-than-expected trade data on Wednesday has weighed on Canada's growth outlook. BMO Capital Markets has cut its estimate for first quarter growth to 2.9 percent annualized, from 3.3 percent previously, and its projection for second quarter growth to 1.3 percent from 1.5 percent, according to a research note Thursday morning, while economists expect oil production cuts to weigh on May gross domestic product.
Canadian government bond prices were mixed across the maturity curve, with the two-year price down 0.5 Canadian cent to yield 0.581 percent and the benchmark 10-year rising 10 Canadian cents to yield 1.393 percent, its lowest since April 20.
Canada's April employment report is due on Friday, expected to reveal no change in employment after a strong gain in the previous month.
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