June 11, 2019 / 2:15 PM / a month ago

Loonie edges higher as investor risk appetite picks up

TORONTO (Reuters) - The Canadian dollar strengthened slightly against its U.S. counterpart on Tuesday, holding near its highest in more than three months, as global stocks and oil prices climbed.

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

Global stocks rose as signs of more fiscal stimulus from China and some easing of last week’s tensions around Central American immigrants and Mexico buoyed investors’ appetite for risk.

Investors have worried that U.S. tariffs imposed on Mexican goods in connection with the immigrants could undermine chances of a new North American trade deal coming into force.

Canada sends about 75 percent of its exports to the United States, including oil. It also runs a current account deficit, so its economy could benefit from a pick-up in the global flow of trade or capital.

The price of oil rose as firmer equities and expectations that OPEC and its allies will keep withholding supply countered concern about slowing economies and demand. U.S. crude oil futures were up 0.5% at $53.52 a barrel.

At 9:44 a.m. (1344 GMT), the Canadian dollar was trading 0.1% higher at 1.3261 to the greenback, or 75.41 U.S. cents. The currency, which touched on Monday its strongest intraday level since March 1 at 1.3226, traded in a range of 1.3251 to 1.3275.

The loonie has benefited this month from expectations that the Bank of Canada will cut interest rates less than the Federal Reserve.

Money markets see a less-than 50 percent chance of a Bank of Canada interest rate cut by December, while they are pricing in at least two cuts over the same period by the Fed.

Canadian government bond prices were lower across a flatter yield curve, with the two-year down 4.5 Canadian cents to yield 1.485% and the 10-year falling 15 Canadian cents to yield 1.538%.

The 10-year yield touched its highest intraday since May 31 at 1.543%.

Reporting by Fergal Smith; Eiting by Steve Orlofsky

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