C$ pares losses against greenback as oil rises

Tue May 24, 2016 9:59am EDT
 
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TORONTO (Reuters) - Higher oil prices helped the Canadian dollar reduce its losses against its broadly firmer U.S. counterpart after the currency weakened to a seven-week low on Tuesday.

The loonie has fallen 5 percent from its 10-month high of C$1.2461 on May 3, pressured by speculation that the U.S. Federal Reserve will raise interest rates as early as next month, as well as a weaker outlook for Canada's economy following a strong start to 2016.

The economy may contract by an annualized rate of 1 percent or more in the second quarter, according to a research note on Tuesday from BMO Capital Markets, well below the Bank of Canada's forecast for a 1 percent expansion.

The central bank is widely expected to hold interest rates at 0.50 percent on Wednesday but strike a more dovish tone. Analysts will parse its statement for indications of the economic impact of the massive wildfire in Alberta. [CA/POLL]

Authorities in Canada lifted evacuation orders on Monday for all work camps and some additional oil facilities that had been shuttered when the blaze threatened the nation's energy hub, a significant step for companies eager to restart production.

At 9:24 a.m. EDT (1324 GMT), the Canadian dollar CAD=D4 was trading at C$1.3148 to the greenback, or 76.06 U.S. cents, slightly weaker than Monday's close of C$1.3143, or 76.09 U.S. cents. It touched its weakest since April 5 at C$1.3188.

The loonie's official close on Friday before the Victoria Day holiday on Monday was C$1.3124, or 76.20 U.S. cents.

Oil reversed early losses, turning slightly positive as investors awaited inventory data from the United States that was expected to show a shrinking supply overhang. U.S. crude CLc1 prices were up 0.15 percent at $48.15 a barrel. [O/R]

The U.S. dollar strengthened across the board and hit an eight-week high against the euro as investors brought forward their bets on when the Fed will raise interest rates again.   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