Canadian dollar post biggest gain in 7 weeks as Wall Street jumps

TORONTO: The Canadian dollar rose to a two-week high against its US counterpart on Thursday, as calmer US bond markets bolstered Wall Street and a Bank of Canada official said spending of excess savings could lead to a stronger economic recovery.

The loonie was trading 0.8% higher at 1.2522 to the greenback, or 79.86 US cents, its biggest gain since Jan. 20. It touched its strongest intraday level since Feb. 25 at 1.2520.

"The third US Treasury auction of the week calmed bond markets, allowing risk assets to rally," said Michael Goshko, corporate risk manager at Western Union Business Solutions.

The safe-haven US dollar fell and the S&P 500 index notched an all-time high as US bond yields steadied. Helping to cap yields, worries about rising inflation have subsided after Wednesday's US consumer price report.

Canada runs a current account deficit and is a major exporter of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.

US crude oil futures settled 2.5% higher at $66.02 a barrel, helped by a fall in US fuel stocks.

"The Canadian dollar was also aided by a more upbeat Bank of Canada on Wednesday," Goshko said.

On Wednesday, Canada's central bank said it now expected the economy to grow in the first quarter, an upgrade from its January forecast of a contraction, saying it was proving more resilient to a second wave of COVID-19 infections than expected.

Canadians have saved a massive nest egg through the pandemic and a rush to spend that money could "meaningfully affect" economic growth, Bank of Canada Deputy Governor Lawrence Schembri said on Thursday.

Canada's jobs report for February is due on Friday.

Canadian government bond yields rose across a steeper curve. The 10-year was up 2.7 basis points at 1.438% but holding well below Monday's 14-month high of 1.545%.