TORONTO: Canada's dollar strengthened to a one-month high against its US counterpart on Wednesday after the Bank of Canada was more upbeat about the economy than some investors expected and as major oil producers looked set to possibly extend production cuts.
The Bank of Canada held interest rates steady at 0.50 percent, as expected. It reiterated its position that excess capacity remains in the economy and wage growth is subdued, but noted strong spending by Canadians along with a housing boom and job growth.
"It's probably a bit more positive than many would have expected," said Doug Porter, chief economist at BMO Capital Markets.
"We're slowly but surely moving towards the day when the Bank (of Canada) might actually consider raising interest rates."
Chances of an interest rate hike this year more than doubled from before the announcement to one-in-four, data from the overnight index swaps market showed.
Prices of oil, one of Canada's major exports, edged higher after US data showed a bigger than expected draw in crude inventories. US crude prices were up 0.08 percent to $51.51 a barrel.
Investors waited for news from Vienna, where ministers from the Organization of the Petroleum Exporting Countries and other nations were discussing whether to extend production cuts into the first quarter of 2018.
At 11:04 a.m. ET (1504 GMT), the Canadian dollar was trading at C$1.3443 to the greenback, or 74.39 US cents, up 0.5 percent.
The currency's weakest level was C$1.3540, while it touched its strongest since April 24 at C$1.3430.
The loonie has recovered from a 14-month low of C$1.3793 set earlier this month, helped by a rally in oil prices and broader losses for the US dollar amid diminishing expectations of a promised fiscal boost to the US economy from President Donald Trump.
Canadian government bond prices were mixed across a flatter yield curve.
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