TORONTO (Reuters) - The Canadian dollar strengthened against the greenback on Wednesday as calm returned to stock markets after they were spooked one day earlier by fading hope of U.S. stimulus, with the loonie rebounding from an earlier one-week low.
The Canadian dollar CAD= was trading 0.3% higher at 1.3263 to the greenback, or 75.40 U.S. cents. Earlier in the session, the currency touched its weakest level since Sept. 30 at 1.3340.
The move higher for the loonie was “a function of the risk-on improvement in equities,” said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. “The Canadian dollar was going along for the ride.”
Wall Street’s main indexes jumped on hopes of at least a partial deal on more fiscal stimulus after U.S. President Donald Trump abruptly called off negotiations on a comprehensive bill in the previous session.
Canada sends about 75% of its exports to the United States, including oil. U.S. crude futures CLc1 settled 1.8% lower at $39.95 a barrel, pressured by a larger-than-expected build in U.S. inventories, while Canadian data showed that economic activity expanded at a slower pace in September.
The seasonally adjusted Ivey Purchasing Managers Index fell to 54.3, a four-month low, from 67.8 in August.
Bank of Canada Governor Tiff Macklem is due to speak on Thursday on the evolution of risks during a pandemic. Like some other central banks, such as the Federal Reserve, the BoC has been delivering the message that the economy needs fiscal support but that additional help from monetary policy will be available if needed.
“I don’t think he (Macklem) will deviate from that,” Chandler said.
Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR rose 5 basis points to 0.620%.
Canada’s September jobs report is due on Friday.
Reporting by Fergal Smith; editing by Grant McCool
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