Canadian dollar posts fresh seven-week high as oil climbs

Mon Dec 12, 2016 4:38pm EST
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened to a fresh seven-week high against its U.S. counterpart on Monday as oil surged and investors weighed what message will accompany an expected interest rate hike this week from the Federal Reserve.

The loonie has rebounded more than three percent from an eight-month low of C$1.3589 in mid-November. A more uncertain trade environment for Canada since the U.S. election and raised investor expectations for Fed rate increases have been offset by higher prices for oil, one of Canada's major exports.

"It's all about oil prices," said Shaun Osborne, chief currency strategist at Scotiabank.

U.S. crude oil futures CLc1 settled $1.33 higher at $52.83 a barrel after the Organization of the Petroleum Exporting Countries and some of its rivals reached their first deal since 2001 to jointly reduce output to tackle global oversupply.

The U.S. dollar .DXY fell against a basket of major currencies on concerns that the Fed could suggest that the greenback's recent gains had gone too far.

"The risk for the U.S. dollar is that oil prices continue to push on and perhaps we get a dovish hike message from the Fed ... as they hike rates now and move to the sidelines until they get some clarity on what kind of policies we are going to get from the (Donald Trump) administration," Osborne said.

The Canadian dollar CAD=D4 ended at C$1.3134 to the greenback, or 76.14 U.S. cents, stronger than Friday's close of C$1.3180, or 75.87 U.S. cents.

The currency's weakest level of the session was C$1.3168, while it touched its strongest since Oct. 19 at C$1.3110.   Continued...

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015.   REUTERS/Mark Blinch