January 4, 2019 / 9:05 PM / 3 months ago

Canadian dollar climbs to 18-day high on oil rally, jobs gain

TORONTO (Reuters) - The Canadian dollar strengthened to its highest in nearly three weeks against the greenback on Friday as stocks and oil prices climbed and after domestic data showed further jobs gains, ahead of next week’s interest rate decision by the Bank of Canada.

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/File Photo

At 3:38 p.m. (2038 GMT), the Canadian dollar CAD=D4 was trading 0.7 percent higher at 1.3399 to the greenback, or 74.63 U.S. cents. The currency touched its strongest level since Dec. 17 at 1.3381.

For the week, the loonie was up 1.8 percent, its biggest advance since September.

“The Canadian dollar has been a strong performer,” said Alfonso Esparza, a senior currency analyst at OANDA. “We have seen some sort of recovery in oil prices and also the job numbers were solid. Following the huge November data point we expected a bit of a slowdown.”

Canada added 9,300 jobs in December on an increase in part-time hiring, slightly more than markets had expected after a record 94,100 jobs were created in the previous month, Statistics Canada data indicated.

Still, money markets expect the Bank of Canada to leave its benchmark interest rate on hold at 1.75 percent next week and through the rest of the year. In November, before a sell-off in stocks and oil prices deepened, the market had expected rates to rise to about 2.50 percent by the end of 2019. BOCWATCH

The price of oil, one of Canada’s major exports, climbed on Friday after proposed trade talks between the United States and China eased some fears about a global economic slowdown. U.S. crude oil futures CLc1 settled 1.9 percent higher at $47.96 a barrel.

Wall Street rebounded after a strong U.S. payrolls report and remarks from Federal Reserve Chairman Jerome Powell that suggested the central bank would be flexible with monetary policy.

Powell’s comments pressured the U.S. dollar, which declined against a basket of major currencies.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR fell 14 Canadian cents to yield 1.842 percent and the 10-year CA10YT=RR declined 82 Canadian cents to yield 1.919 percent.

On Thursday, the 10-year yield touched its lowest intraday level in more than 16 months at 1.814 percent.

Separate data from Statistic Canada showed that Canadian producer prices fell by 0.8 percent in November from October, the largest drop in almost two years, thanks largely to cheaper energy and petroleum products.

Reporting by Fergal Smith; Editing by Nick Zieminski and Susan Thomas

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