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C$ strengthens as commodity investors bet on U.S. stimulus

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 rose to a five-day high against its U.S. counterpart on Tuesday as the prospect of more U.S. economic stimulus boosted oil prices and data showed expansion in Canada’s manufacturing sector for the first time in five months.

The loonie CAD= was trading 0.3% higher at 1.3354 to the greenback, or 74.88 U.S. cents. The currency touched its strongest intraday level since last Thursday at 1.3342.

“All commodities are rallying and the Canadian dollar can’t help but follow along with that,” said Adam Button, chief currency analyst at ForexLive.

Canada is a major producer of commodities, including gold XAU=, which notched a record high above $2,000 an ounce, and oil. U.S. crude oil futures CLc1 settled 1.7% higher at $41.70 a barrel, supported by hopes the White House and lawmakers in the U.S. Congress are getting closer to a deal on a new economic stimulus package and signs America is making progress in curbing the spread of the novel coronavirus.

“The commodity market is signaling a lot of optimism,” Button said.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 52.9 in July from 47.8 in June. It was the first time since February that the index was above the 50 threshold, indicating expansion in the sector, and the highest reading since January 2019.

Canada’s jobs report for July is due on Friday.

The loonie has rallied nearly 10% since March. Its advance on Tuesday came as the U.S. dollar .DXY, which had its worst month in a decade in July, lost ground against a basket of major currencies.

Canadian government bond yields eased across much of a flatter curve on Tuesday, with the 10-year CA10YT=RR down 3 basis points at 0.438%. On Friday, it touched its lowest intraday level since March 9 at 0.412%.

Reporting by Fergal Smith; Editing by Nick Zieminski and Paul Simao

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