Canadian dollar climbs to two-month high as greenback slides

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as the Federal Reserve kept its loose monetary policy intact, pressuring the greenback, and investors weighed the policy implications of a potentially divided U.S. Congress.

The loonie CAD= was trading 0.7% higher at 1.3051 to the greenback, or 76.62 U.S. cents. The currency touched its strongest intraday level since Sept. 1 at 1.3024.

The safe-haven U.S. dollar .DXY slumped against a basket of major currencies, as global stocks rallied and the Fed pledged again to do whatever it can in coming months to sustain a U.S. economic recovery threatened by a spreading coronavirus pandemic and facing uncertainty over a still undecided presidential election.

Regardless of the outcome of the White House race, a divided Congress could lead to policy gridlock in Washington, raising doubts over prospects for a large coronavirus relief package. A large economic package would bolster the outlook for Canada’s commodity-linked currency, FX strategists said in a Reuters poll.

The price of oil CLc1, one of Canada's major exports, settled 0.9% lower at $38.79 a barrel.

Canada’s jobs report for October is due on Friday, which could offer some clues about the strength of Canada’s economic recovery.

Canadian government bond yields were mixed across a steeper curve, with the 10-year CA10YT=RR up half a basis point at 0.617%.

Reporting by Fergal Smith; Editing by Steve Orlofsky and Chizu Nomiyama