TORONTO (Reuters) - The Canadian dollar strengthened slightly against a broadly weaker U.S. dollar on Thursday, notching its first weekly advance since October as oil added to recent gains.
With volumes expected to be light for the rest of the year, momentum could help the loonie strengthen further before fresh data offers further economic clues in the new year.
The currency has been buffeted all year by stubbornly low prices for oil, a major Canadian export, prompting the Bank of Canada to cut rates twice earlier in the year.
With the domestic economy struggling to regain momentum after emerging from a mild recession, the prospect of further easing will become a more common topic of discussion.
“If the data tails off, why not cut again? Inflation isn’t a problem,” said Adam Button, currency analyst at ForexLive in Montreal.
“The balancing act in 2016 is understanding how much weight to put on economic data and how much to put on oil,” he said, pointing out that the currency was a top performer on Wednesday despite weak GDP data as oil prices rose.
The Canadian dollar CAD=D4 ended at C$1.3845 to the greenback, or 72.23 U.S. cents, stronger than Wednesday’s official close of C$1.3857, or 72.17 U.S. cents.
It traded in a tight range in the last session before Christmas, with its strongest level at C$1.3814 and its weakest at C$1.3873. The currency underperformed most of its other key currency counterparts.
U.S. oil prices rose above $38 a barrel but remained within sight of an 11-year low reached earlier this week, as signs of a tighter U.S. market raised hopes a supply glut would ease. [O/R]
Canadian government bond prices were higher across the maturity curve, with the two-year CA2YT=RR price up 4 Canadian cents to yield 0.487 percent and the benchmark 10-year CA10YT=RR rising 34 Canadian cents to yield 1.379 percent.
Editing by Bernadette Baum and Bill Trott