TORONTO: The Canadian dollar strengthened to a one-week high against its US counterpart on Thursday, although some gains were pared as oil pulled back from its highest levels, while Federal Reserve officials were less cautious on US interest rate hikes.
Oil rose to six-month highs as investors weighed a forecast for tighter global supplies against signs of another storage build at the hub for US crude futures. US crude oil futures settled at $46.70 a barrel, up 47 cents.
The US dollar rose against a basket of currencies as Fed officials voiced willingness to continue on a rate-hiking path.
The Canadian dollar is likely to be range-bound until the trajectory for Fed policy becomes clearer and until oil producers meet at the beginning of June, said Darren Richardson, senior corporate dealer at CanadianForex.
Some oil sands operations have restarted operations this week after having been shuttered by a huge wildfire. The loss of production has weighed on Canada's economic outlook. Economists say second-quarter growth may slow to a standstill, leaving the central bank on hold.
Overnight index swaps imply a 27-percent chance of a Bank of Canada rate cut this year, dipping from nearly 40 percent at the start of the week as oil rallied and some oil sands operations restarted. Still the market has swung from a 20 percent chance of a hike seen at the beginning of the month.
The Canadian dollar ended at C$1.2834 to the greenback, or 77.92 US cents, stronger than Wednesday's close of C$1.2851, or 77.81 US cents.
The currency's weakest level was C$1.2879, while it touched its strongest since May 4 of C$1.2772.
Canadian new home prices rose 0.2 percent in March, topping analysts' expectations of 0.1 percent, while the number of job vacancies in Canada fell in the fourth quarter of last year.
Canadian government bond prices were lower across the maturity curve in sympathy with US Treasuries. The two-year price fell 5 Canadian cents to yield 0.566 percent and the benchmark 10-year declined 14 Canadian cents to yield 1.319 percent.
The 10-year yield touched on Wednesday its lowest since April 18 of 1.274 percent.
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