Canadian dollar strengthens as oil rises, Wall Street pares losses

Thu Oct 13, 2016 4:38pm EDT
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as oil prices rose and Wall Street pared some losses, spurred by weak Chinese trade data.

A sharp decline in China's exports revived concerns about the health of the world's second-biggest economy.

Commodity currencies such as the Canadian dollar were sold on the weak Chinese data. But investors who got short the currency were forced to cover their positions as oil and U.S. stocks rebounded from session lows, said Patric Booth, head of trading at Velocity Trade.

The U.S. dollar .DXY tumbled from a seven-month high as Chinese concerns spooked a market that is expecting an interest rate increase from the Federal Reserve by the end of the year.

U.S. crude oil futures CLc1 settled up 26 cents at $50.44 a barrel after a U.S. government report showing hefty draws in diesel and gasoline offset the first crude inventory build in six weeks. [O/R]

Oil is one of Canada's major exports.

Still, the Canadian dollar's normally tight link with the price of oil, which broke down in September, likely will not reassert itself until after the U.S. election and a potential interest rate hike by the Federal Reserve, currency strategists said.

"The fact that crude has gone up above $50 and the Canadian dollar hasn't really benefited one bit since the OPEC announcement ... to me leaves Canada (dollar) vulnerable if oil sells off," Booth said.   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