TORONTO (Reuters) - The Canadian dollar rose against its U.S. counterpart on Tuesday, helped by an increase in crude oil prices, even as the greenback firmed against a basket of other major currencies.
Crude oil prices rallied as colder weather prompted buying a day after prices slid 3 percent, but weak global demand and abundant supplies from OPEC members were expected to remain an obstacle.
“Where oil goes that’s where Canada goes,” said Ronald Simpson, managing director, global currency analysis at Action Economics, referring to the strong correlation between its currency and oil, one of Canada’s major exports.
U.S. crude CLc1 prices settled at $37.87 a barrel, up 2.9 percent, while Brent crude LCOc1 added 3.19 percent to $37.79.[O/R]
“Equities are a little bit higher and this is also helping to support some of the more risk sensitive and commodity sensitive currencies,” said Eric Viloria, currency strategist at Wells Fargo Securities.
The Canadian dollar CAD=D4 closed at C$1.3823 to the greenback, or 72.34 U.S. cents, after having last traded at C$1.3904, or 71.92 U.S. cents, on Monday, according to Thomson Reuters data.
The Bank of Canada’s official close on Dec. 24, before the Christmas break, was C$1.3845, or 72.23 U.S. cents.
The currency’s highest level of the session was C$1.3815, just shy of Monday’s strongest level of C$1.3812, while its weakest level was C$1.3941.
Against the euro, the Canadian dollar rallied to C$1.5117. It fell to near a four-month low last week at C$1.5320.
Speculators have raised bearish bets on the Canadian dollar following the U.S. Federal Reserve rate increase, according to the latest data from the Commodity Futures Trading Commission released on Monday.
Canadian government bond prices were lower across the maturity curve, pressured by a pick-up in risk appetite, while the market also contended with firmer-than-expected U.S. home prices and consumer confidence, as well as a U.S. 5-year note auction.
The two-year bond CA2YT=RR price was down 3 Canadian cents to yield 0.50 percent and the benchmark 10-year CA10YT=RR fell 29 Canadian cents to yield 1.41 percent.
The Canada-U.S. 10-year spread was 5.4 basis points wider at -90.0, as Treasuries more than unwound Monday’s rally, extending recent outperformance for Canadian government bonds and trading at a record wide gap.
Reporting by Fergal Smith; Editing by Dan Grebler and Steve Orlofsky