Canadian dollar gains as oil prices climb, greenback dips

TORONTO (Reuters) - The Canadian dollar gained against its U.S. counterpart on Thursday, helped by stronger oil prices and a broader pullback for the greenback on a perceived lack of progress on U.S. tax reform a day after the release of Federal Reserve minutes seen as dovish.

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 came as U.S. Treasury Secretary Steven Mnuchin said he does not see any changes to the North American Free Trade Agreement in the short term and that he wanted to see tax reform passed before an August recess.

Canada sends 75 percent of its exports to the United States and could suffer badly if U.S. President Donald Trump follows through on promises to renegotiate NAFTA.

“We’re in consolidation mode right now, waiting for either more policy announcements out of Trump, waiting for more central bank announcements,” said Blake Jespersen, a managing director for foreign exchange sales at BMO Capital Markets.

“The Canadian dollar did a bit better on the back of stronger oil” after failing to push much beyond C$1.32 in the prior session, he said.

“It was a combination of large flows up there and oil turned around and momentum went back the other way,” he added.

The Canadian dollar CAD=D4 settled at C$1.3114 to the greenback, or 76.25 U.S. cents, stronger than Wednesday's close of C$1.3144, or 76.08 U.S. cents.

The currency’s weakest level of the session was C$1.3169, while it touched its strongest since Monday at C$1.3083.

Benchmark Brent crude oil LCOc1 rose 74 cents a barrel to settle at $56.58 after touching a high of $57.26. U.S. light crude CLc1 settled up 86 cents at $54.45 after touching $54.94. [O/R]

In an interview with Reuters, Trump spoke favorably about a potentially export-boosting border adjustment tax being pushed by Republicans in the U.S. Congress, but did not specifically endorse it.

Canadian average weekly earnings of non-farm payroll employees rose 1.0 percent in December, while the number of non-farm payroll employees increased by 39,200 for the same month, data from Statistics Canada showed.

Canadian government bonds prices moved higher in sympathy with U.S. Treasuries, with the two-year CA2YT=RR price up 3 Canadian cents to yield 0.767 percent and the 10-year CA10YT=RR rising 40 Canadian cents to yield 1.668 percent.

Canada’s inflation report for January is due on Friday, with economists expecting the annual rate to edge up to 1.6 percent.

Additional reporting by Fergal Smith; Editing by Nick Zieminski and James Dalgleish