C$ strengthens with oil as China hints at stimulus

TORONTO: The Canadian dollar edged higher against its broadly stronger US counterpart on Tuesday as oil prices rebounded and China hinted at more stimulus to support its slowing economy.

China is seeking a strong start to the economy in the first quarter to establish conditions favorable to achieving 2019's major targets, state television reported on Monday, quoting Premier Li Keqiang.

Canada is running a current account deficit and exports many commodities, including oil, so its economy could benefit from measures that boost global growth.

At 9:25 a.m. (1425 GMT), the Canadian dollar was trading 0.2 percent higher at 1.3254 to the greenback, or 75.45 US cents. The currency, which on Monday touched its weakest in nearly one week at 1.3297, traded in a range of 1.3244 to 1.3282.

The price of oil rose after tumbling the previous session, although a darkening economic outlook may soon weigh on growth in fuel demand. US crude prices were up 1.5 percent at $51.25 a barrel.

The US dollar rose against a basket of major currencies after data showing Germany's economy slowed in 2018 weighed on the euro, while investors awaited a vote later on Tuesday in Britain's parliament on Prime Minister Theresa May's Brexit deal.

Resales of Canadian homes fell 2.5 percent in December from the previous month, extending a string of monthly declines since September, the Canadian Real Estate Association said.

The Bank of Canada, which has hiked interest rates five times since July 2017, said last week that soft housing activity would weigh on the domestic economy as it left interest rates on hold.

Canadian inflation data for December is due on Friday, which could help guide market expectations for additional rate hikes from the central bank.

Canadian government bond prices were higher across a flatter yield curve, with the two-year up 0.5 Canadian cent to yield 1.883 percent and the 10-year rising 16 Canadian cents to yield 1.945 percent.

The gap between Canada's two-year yield and its US equivalent narrowed by 1.8 basis points to a spread of 63.1 basis points in favor of the US bond.