C$ strengthens to one-week high as oil and stocks rally

TORONTO (Reuters) - The Canadian dollar strengthened to a one-week high against its U.S. counterpart on Thursday as higher oil and stock prices supported the risk-sensitive commodity-linked currency.

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

Gains for the loonie come one day after the Bank of Canada stayed optimistic about the economic outlook even as it cut its growth forecasts.

Oil prices recovered from sharp losses the previous day, but brokers said the downtrend could resume soon as record-high stocks and worries over slowing economic growth dampened sentiment. U.S. crude CLc1 prices were up 1.12 percent to $45.25 a barrel. [O/R]

U.S. stocks rose after a major bank reported second-quarter profit that beat estimates and as the Bank of England unexpectedly kept interest rates unchanged but signaled it was likely to deliver stimulus in August.

At 9:43 a.m. EDT (1343 GMT), the Canadian dollar CAD=D4 was trading at C$1.2932 to the greenback, or 77.33 U.S. cents, stronger than Wednesday's close of C$1.2986, or 77.01 U.S. cents.

The currency’s weakest level of the session was C$1.2987, while it touched its strongest since July 7 at C$1.2908.

New home prices in Canada rose by a higher-than-forecast 0.7 percent in May from April, mainly on higher prices in Vancouver and the Toronto region, data from Statistics Canada showed.

Canadian government bond prices were lower across the maturity curve as improved risk appetite reduced the appeal of safe-haven assets.

The two-year CA2YT=RR price fell 7.5 Canadian cents to yield 0.532 percent and the benchmark 10-year CA10YT=RR dropped 43 Canadian cents to yield 1.049 percent.

On Monday, the 10-year yield hit a 5-month low at 0.935 percent.

Reporting by Fergal Smith; Editing by Nick Zieminski