TORONTO: The Canadian dollar edged higher against its US counterpart on Wednesday as oil prices climbed, but gains were limited as investors grew more worried about a global economic slowdown.
Global stock markets slipped for the second straight day and bond yields inched lower on growing fears that policymakers bent on dampening inflation will tip their economies into recession.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to prospects for economic growth.
Oil gained for a fourth straight session with tight supply worries offsetting concerns about a weaker global economy.
US crude prices rose 1.7% to $113.64 a barrel, while the Canadian dollar was trading 0.2% higher at 1.2850 to the greenback, or 77.82 US cents, its fourth straight day of gains. The loonie traded in a range of 1.2845 to 1.2890, after touching on Tuesday its strongest intraday level in more than two weeks at 1.2816.
Canada’s GDP data for April, due to be released on Thursday, could offer clues on the strength of the domestic economy.
With inflation soaring, money markets expect the Bank of Canada to raise interest rates by three-quarters of a percentage point at its next policy decision on July 13, which would be its biggest hike in 24 years.
Canadian government bond yields rose across the curve, with the 10-year up 1.8 basis points at 3.352%. The gap between Canadian and US 10-year yields widened by 4.7 basis points to 17.4 basis points in favor of the Canadian bond. The BoC is due to conduct a 30-year auction, with the bidding deadline set for 12 p.m. ET (1600 GMT).
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