Canadian dollar firms along with higher oil prices

TORONTO: The Canadian dollar strengthened against its US counterpart on Tuesday as oil rallied and the greenback fell against a basket of major currencies, but gains for the loonie were capped as investors weighed prospects for US Senate runoff elections.

The price of oil, one of Canada's major exports, rose as tension simmered following Iran's seizure of a South Korean vessel and as the OPEC+ group studied a possible production cut in February. US crude prices were up 1.4% at $48.28 a barrel, while the US dollar lost ground after China lifted its official yuan exchange rate by its highest margin since it abandoned a dollar peg in 2005.

The Canadian dollar was trading 0.2% higher at 1.2755 to the greenback, or 78.40 US cents. The currency traded in a range of 1.2730 to 1.2791. On Monday, it notched a near three-year high at 1.2661 before pulling back.

World shares struggled on Tuesday amid new COVID-19 lockdowns in Europe and Senate runoff races in Georgia that will affect incoming US President Joe Biden's ability to pursue his preferred economic policies.

Canada sends about 75% of its exports to the United States. Canada's trade report for November is due on Thursday, while the December jobs report is set for Friday.

Canadian government bond yields were higher across a steeper curve in sympathy with US Treasuries. The 10-year rose 1.7 basis points to 0.694%.