TORONTO (Reuters) - The Canadian dollar strengthened for the fifth straight day against its U.S. counterpart on Tuesday, posting a near eight-week high as higher oil prices offset expected monetary policy divergence between the U.S. and Canada.
U.S. crude CLc1 prices were up 0.66 percent at $53.18 a barrel, supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organized by the Organization of the Petroleum Exporting Countries and other exporters.
Oil is one of Canada’s major exports.
Fed fund futures show a 97-percent probability that the Federal Reserve will lift rates by a quarter of a percentage point at the end of its two-day policy meeting on Wednesday, according to the CME Group.
In contrast, the Bank of Canada pointed last week to “significant” slack in the Canadian economy as it held interest rates steady, setting the stage for divergence in policy from that of the Fed.
At 9:20 a.m. EDT (1420 GMT), the Canadian dollar CAD=D4 was trading at C$1.3109 to the greenback, or 76.28 U.S. cents, stronger than Monday’s close of C$1.3134, or 76.14 U.S. cents.
The currency’s weakest level of the session was C$1.3139, while it touched its strongest since Oct. 19 at C$1.3106.
The loonie has rebounded 3.7 percent from an eight-month low of C$1.3589 in mid-November. Higher prices for oil have offset raised investor expectations for Fed rate increases and a more uncertain trade environment for Canada since the U.S. election.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries.
The two-year CA2YT=RR rose 2.5 Canadian cents to yield 0.747 percent and the benchmark 10-year CA10YT=RR climbed 30 Canadian cents to yield 1.712 percent.
On Monday, the 10-year yield touched its highest intraday level since July 2015 at 1.781 percent.
Reporting by Fergal Smith; Editing by Nick Zieminski