TORONTO: The Canadian dollar strengthened to a two-and-a-half-year high against its U.S. counterpart on Thursday as oil climbed and the greenback broadly lost ground, while the domestic focus turned to an economic progress report from the Bank of Canada.

The loonie was trading 0.4pc higher at 1.2761 to the greenback, or 78.36 U.S. cents.

It touched its strongest intraday level since May 2018 at 1.2735.

Oil, one of Canada's major exports, was boosted by hopes that the release of COVID-19 vaccines would lead to a faster demand recovery. U.S. crude prices were up nearly 2pc at$46.41 a barrel.

The U.S. dollar fell against a basket of major currencies after data showed an increase in U.S. initial jobless claims and the unveiling of fresh stimulus measures from the European Central Bank failed to pressure the euro.

Bank of Canada Deputy Governor Paul Beaudry is due to speak about the central bank's quantitative easing operations, as part of an economic progress report following the central bank's interest rate decision on Wednesday. Beaudry's prepared remarks will be made available at 1:30 p.m. (1830 GMT).

On Wednesday, the central bank gave less attention to recent gains for the currency than some investors expected.

The BoC left its key interest rate unchanged at 0.25pc, as expected, and said it would maintain its current policy of quantitative easing.

Canadian government bond yields were mixed across the curve on Thursday, with the 10-year up half a basis point at 0.754pc.