TORONTO: The risk-sensitive Canadian dollar edged higher against its US counterpart on Wednesday as global financial markets stabilized for a second straight day following volatility triggered by Britain's vote to leave the European Union.
European and Asian stock markets built on a recovery from the aftermath of last week's Brexit vote as investors wagered central banks would ultimately ride to the rescue with more stimulus.
Oil rose as traders moved money back into markets hit by the initial shock of Brexit, while a potential oil workers' strike in Norway and a crisis in Venezuela's oil sector also provided support. US crude prices were up 0.86 percent at $48.26 a barrel.
At 9:42 a.m. EDT (1342 GMT), the Canadian dollar was trading at C$1.3019 to the greenback, or 76.81 US cents, slightly stronger than Tuesday's close of C$1.3035, or 76.72 US cents.
The currency's strongest level of the session was C$1.2976, while its weakest was C$1.3042.
Expectations for the next Bank of Canada interest rate hike have been pushed back to the first quarter of 2018, according to a Reuters poll of primary dealers, who expect Britain's vote to leave the European Union to weigh on Canada's economy.
Overnight index swaps implied a one-in-five chance of a rate cut this year by the central bank after pricing in no change in policy before Brexit.
Canadian government bond prices were mixed across the maturity curve, with the two-year price down 2 Canadian cents to yield 0.512 percent and the benchmark 10-year rising 3 Canadian cents to yield 1.079 percent.
The curve flattened as the spread between the 2-year and 10-year yields narrowed by 1.6 basis points to 56.7 basis points, indicating outperformance for longer-dated maturities.
Canadian gross domestic product data for April is due on Thursday. Economic growth is expected to have edged up 0.1 percent following two months of declines.
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