February 20, 2019 / 4:01 PM / 2 months ago

Canadian dollar beats G10 peers as oil climbs to highest this year

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday to its highest in two weeks, posting the biggest rise among its peers, as oil prices rallied and ahead of speech on Thursday by Bank of Canada Governor Stephen Poloz.

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

The price of oil, one of Canada’s major exports, climbed to its highest of 2019 on hopes that oil markets will balance later this year, helped by output cuts from top producers as well as U.S. sanctions on OPEC members Iran and Venezuela.

U.S. crude oil futures settled 1.5 percent higher at $56.92 a barrel.

“As oil goes, so does Canada,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “The Canadian dollar is gaining on the back of stronger oil and a generally weaker U.S. dollar.”

The U.S. dollar gained against the yen and cut losses versus the euro on Wednesday after the Federal Reserve, in the minutes of its latest policy meeting, said the U.S. economy and its labor market remained strong. Still, the greenback has weakened about 0.4 percent this week against a basket of major currencies.

At 4:44 p.m. (2144 GMT), the Canadian dollar was trading 0.3 percent higher at 1.3176 to the greenback, or 75.90 U.S. cents, the biggest gain of G10 currencies.

The currency touched its strongest intraday level since Feb. 6 at 1.3151.

Gains for the loonie came as Canada’s oil-producing province of Alberta said it has leased 4,400 rail cars in a multibillion-dollar move to clear a glut of crude that depressed prices.

The Bank of Canada said last month it expects investment in the energy sector to contract because of low oil prices and production curtailments in Alberta.

Bank of Canada Governor Stephen Poloz is due to speak on monetary policy on Thursday, while Canadian retail sales data for December is due on Friday.

Canadian government bond prices were mixed across a steeper yield curve. The two-year was flat to yield 1.774 percent and the 10-year declined 4 Canadian cents to yield 1.895 percent.

Reporting by Fergal Smith; Editing by David Gregorio and James Dalgleish

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