C$ rises as uncertain US economic outlook drags US dollar lower

The Canadian dollar notched a fourth straight day of gains against its US counterpart on Thursday, as an unexpected rise in US weekly jobless claims raised worries about the outlook for the US economy, leaving few takers for the US dollar.

The Canadian dollar was at C$1.3407 to the greenback, or 74.59 US cents, stronger than Wednesday's close of C$1.3416, or 74.54 US cents. The loonie touched a 6-week high of 1.3352 to the dollar, earlier in the session.

The number of Americans filing for unemployment benefits rose last week for the first time in nearly four months, suggesting the US labor market was stalling amid a resurgence in new COVID-19 cases and depressed demand.

"This morning's snapback in jobless claims helped reinforce the perception that US growth is set to slip relative to the euro area and other major economies, and traders are setting up for a wider-than-previously-expected divergence between US and European PMIs tomorrow," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

Preliminary estimates of July purchasing manager's index (PMI) for the European Union and the United States is expected to be released on Friday.

The US dollar was about 0.2% lower against the euro.

"As a high-beta currency, the Canadian dollar is simply along for the ride," Schamotta said.

The loonie, which has been supported in recent sessions by rising oil prices, came under some pressure earlier in the session as oil prices retreated on concerns about rising US oil inventories and surging coronavirus cases.

On Thursday, Canadian government bond prices were mixed across the maturity curve. The two-year yield was at 0.285% up from 0.272% late on Wednesday, while the benchmark Canadian 10-year yield slipped to 0.506% from Wednesday's 0.51%.