C$ gains for 5th straight day, boosted by higher oil prices

TORONTO: The Canadian dollar strengthened to a three-year high against its US counterpart on Thursday as oil prices climbed and investors adjusted to more hawkish messaging from the Bank of Canada compared to the Federal Reserve.

The loonie was trading 0.3% higher at 1.2280 to the greenback, or 81.43 US cents, extending a string of gains since last Friday and the biggest gain among G10 currencies.

It touched its strongest level since February 2018 at 1.2278.

Reaction to central bank guidance and higher oil prices are "two forces really working in favor of the Canadian dollar for now," said Bipan Rai, North America head of FX strategy at CIBC Capital Markets.

Rai expects the currency to strengthen further to the 1.2050 area in the near term but was less bullish on its longer term outlook.

The Bank of Canada last week signaled it could start hiking rates from record lows in late 2022 and cut the pace of its bond purchases.

Canada's GDP report for February is due on Tuesday which could offer further clues on the central bank's policy outlook.

In contrast, the Federal Reserve on Wednesday said it was too early to consider rolling back emergency support for the economy, pressuring the US dollar.

The price of oil, one of Canada's major exports, settled 1.8% higher at $65.01 a barrel as strong US economic data offset concerns about the impact of higher COVID-19 cases in Brazil and India.

Canadian government bond yields were higher across a steeper curve. The 10-year touched its highest since March 30 at 1.611% before dipping to 1.572%, up 3.9 basis points on the day.