TORONTO (Reuters) - The Canadian dollar strengthened against the greenback on Tuesday after U.S. durable goods orders came in weaker than expected, helping nudge oil prices higher, but markets were already looking ahead to the conclusion of the Federal Reserve’s policy meeting on Wednesday.
The U.S. dollar weakened after government data showed new orders for capital goods by U.S. businesses recorded their biggest drop in eight months in September.
The drop in the U.S. dollar helped Brent crude oil prices rise above $86 a barrel. A weaker dollar helps global consumers buy dollar-denominated commodities such as oil.
“Oil has been one of the key drivers of markets generally and so we have a more encouraging sentiment within market generally, and typically that’s usually a fairly good environment for the Canadian dollar,” said Camilla Sutton, chief currency strategist at Scotiabank.
“But the broad picture is that the Canadian dollar has really been stuck in a range, a lot of currencies have, trying to look for where the next shift is going to be, and with the Fed meeting tomorrow, that puts a big risk in the horizon.”
While the Fed is expected to announce the end of its bond-purchase program at the conclusion of its two-day meeting, the U.S. central bank will likely reinforce its willingness to wait a while before raising interest rates.
At 9:19 a.m. Eastern time the Canadian dollar CAD=D4 was at C$1.1205, or 89.25 U.S. cents, stronger than Monday’s North American session at C$1.1238, or 88.98 U.S. cents.
Sutton expects the currency will trade between C$1.1200 and Tuesday’s opening level at C$1.1247, but she said if the loonie breaks through the C$1.1200 level it could test last week’s strength of C$1.1184.
At home, traders are looking ahead to testimony by Bank of Canada Governor Stephen Poloz to the Senate banking committee on Wednesday. His testimony had been scheduled for last week but was canceled due to a gunman’s attack on Parliament Hill.
Canadian government bond prices were mixed, with the two-year CA2YT=RR up half a Canadian cent to yield 1 percent. The benchmark 10-year CA10YT=RR was down 3 Canadian cents to yield 2.018 percent.
Reporting by Andrea Hopkins; Editing by Chris Reese