Canadian dollar strengthens to nearly two-week high as Brexit odds fall

Thu Jun 23, 2016 9:38am EDT
 
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TORONTO (Reuters) - The Canadian dollar strengthened to a nearly two-week high against its U.S. counterpart on Thursday as increased chances that Britain will stay in the European Union and higher oil prices supported the risk-sensitive commodity-linked currency.

A series of late opinion polls favored Britons voting in Thursday's referendum to stay in the European Union and bookmakers' odds indicated a further shift toward the "Remain" camp.

Optimism over Britain remaining in the EU helped drive up stocks and oil prices. U.S. crude CLc1 prices were up 1.32 percent to $49.78 a barrel.

The loonie would weaken and the chances that the Canadian central bank cuts interest rates would jump if Britain votes to leave the European Union, strategists warn, noting the result could hit global growth and spell bad news for commodity-exporting countries.

At 9:06 a.m. EDT, the Canadian dollar CAD=D4 was trading at C$1.2737 to the greenback, or 78.51 U.S. cents, stronger than Wednesday's close of C$1.2839, or 77.89 U.S. cents.

The currency's weakest level of the session was C$1.2843, while it touched its strongest since June 10 at C$1.2680.

Gains for the loonie came after domestic data on Wednesday showed retail sales rebounded in April to reach a record C$44.28 billion.

Still, the Bank of Canada has signaled that the economy may contract in the second quarter after a solid start to the year as a huge wildfire in Alberta weighs on oil production.

Canadian government bond prices were lower across the maturity curve, in sympathy with U.S. Treasuries, as increased risk appetite reduced investor demand for safe-haven assets.   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