C$ climbs to 5-week high vs US dollar as oil prices rise

The Canadian dollar strengthened to a more than five-week high against its US counterpart on Tuesday, helped by a rise in oil prices on positive news about vaccine trials and a European Union stimulus deal as well as data showing a rebound in retail sales.

The Canadian dollar was at C$1.3459 to the greenback, or 74.30 US cents, stronger than Monday's close of C$1.3533, or 73.89 US cents.

The loonie, which has been in a narrow range against the greenback for the past seven weeks, was at its strongest level since June 11.

"Oil, and by association the Canadian dollar, and other oil-correlating currencies, have been boosted by a broader risk-on theme in global markets," said Jonathan Coughtrey, managing director at Action Economics.

The price of oil, one of Canada's major exports, rose on Tuesday, helped by an agreement among European Union leaders on a 750 billion euro ($859 billion) fund to prop up coronavirus-hit economies and by promising coronavirus vaccine data released on Monday.

That took prices to levels last seen when an oil price war erupted in early March between Russia and Saudi Arabia.

Canadian retail sales increased by a record 18.7% in May from April to C$41.79 billion ($31.06 billion), as higher sales at motor vehicle and parts dealers led the rebound, Statistics Canada said on Tuesday.

In a preliminary flash estimate, Statistics Canada said June retail sales could rise by 24.5%.

"The apparent acceleration in June is a better result than we were expecting," Stephen Brown, senior Canada economist at Capital Economics, said in a note.

Canadian government bond yields edged higher across the maturity curve. The two-year yield was at 0.28% up from 0.27% late on Monday, while the benchmark Canadian 10-year yield rose to 0.515% from Monday's 0.514%.