Canadian dollar's advance stalls as oil prices decline

TORONTO: The Canadian dollar was little changed against its US counterpart on Tuesday, pulling back from an earlier near seven-week high as oil prices fell and data showed climbing domestic coronavirus infections.

Canada's chief public health officer warned that Canadians could face tighter health restrictions again as COVID-19 case numbers creep higher, particularly in the West. Canada's seven-day rolling average of newly reported cases has ticked up again after falling to a low in early July.

The price of oil, one of Canada's major exports, fell as US lawmakers prepared to wrangle over an economic stimulus package and investors worried about a rise in coronavirus cases worldwide. US crude oil futures settled 1.4% lower at $41.04 a barrel.

The US dollar index bounced off a two-year low, but looked primed for further weakness as the United States continued to see a rise in coronavirus cases, while the Federal Reserve is expected to maintain very loose monetary policies.

"Most of the gains over the last month for Canada has been due to US dollar weakness," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. "The US struggles with COVID has helped us (the Canadian dollar) on a relative basis."

The loonie was trading nearly unchanged at 1.3360 to the US dollar, or 74.85 US cents. The currency, which has benefited in recent weeks from signs of global economic recovery, touched its strongest intraday level since June 10 at 1.3331.

Canadian government bond yields were lower across much of a flatter curve along with lower Treasury yields. The 10-year was down 4.8 basis points at 0.475%.

Canada's GDP report for May is due on Friday. It is expected to show some recovery in the economy after a sharp contraction in April.