TORONTO (Reuters) - Canada's dollar climbed against its U.S. counterpart on Tuesday after upbeat U.S. manufacturing data helped ease investor concerns about the economic outlook of Canada's largest trading partner.
The U.S. Institute for Supply Management report showed the pace of growth in the U.S. manufacturing sector picked up in April to its highest level in 10 months, suggesting the economy still had some resilience after indications it had lost momentum at the start of the second quarter.
The data helped to boost assets perceived to be riskier such as equities and commodity-linked currencies, pushing the Dow to its highest level since December 2007. .N
"We got a bit of a lift from the better-than-expected U.S. ISM numbers, which put a bright spot on global growth and helped put back a little back on the table in terms of expectations for rate hikes in Canada," said Avery Shenfeld, chief economist at CIBC World Markets.
Canada's currency slumped on Monday after weaker-than-expected domestic growth data reduced interest rate hike expectations. <I D:nL1E8FU3PH>
The currency had hit a seven-month high on Friday, partly due to recent signs that the Bank of Canada is closer to tightening monetary policy.
The central bank had surprised investors on April 17 with a more positive domestic economic outlook and an explicit warning that it may have to start raising rates again. Bank of Canada Governor Mark Carney on Tuesday reiterated that message.
The Canadian currency finished the day at C$0.9858 against the greenback, or $1.0144, after climbing as high as C$0.9832 versus the U.S. dollar, or $1.0171.
On Monday it closed at C$0.9879 versus the U.S. dollar, or
The Canadian dollar's recovery on Tuesday came after the Reserve Bank of Australia surprised markets overnight with a 50-basis point rate cut.
Canada's currency strengthened against the Australian and New Zealand dollars after the move, as well as the Japanese yen.
David Bradley, a director of foreign exchange trading at Scotiabank, said he sees the Canadian currency trading in a tight range of C$0.9800 to C$0.9900 versus the greenback in the next couple of days.
Canadian bond prices outperformed U.S. Treasuries with Canada's two-year bond up 2 Canadian cents higher to yield 1.329 percent, while the benchmark 10-year bond fell 8 Canadian cents to yield 2.046 percent.
Additional reporting by Claire Sibonney; Editing by Jeffrey Hodgson