Canadian dollar steadies near two-week high versus weaker greenback

TORONTO (Reuters) - The Canadian dollar held near a two-week high against its U.S. counterpart on Friday, benefiting from a recent rise in oil prices and a weakening of the greenback this week.

A Canada Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

At 4 p.m. ET (2100 GMT), the Canadian dollar CAD=D4 was little changed at C$1.2678 to the greenback, or 78.88 U.S. cents.

The currency’s weakest level of the session was C$1.2695, while it touched its strongest since Oct. 25 at C$1.2666.

“The loonie is just following along today, not driven by a strong catalyst but driven by ebbs and flows of the U.S. dollar,” said Rahim Madhavji, President at Knightsbridge Foreign Exchange.

The U.S. dollar .DXY added to this week's losses against a basket of currencies, pressured by investor disappointment that a landmark U.S. tax bill may be delayed until 2019.

U.S. crude CLc1 was trading 0.6 percent lower at $56.84 a barrel after a report showing that U.S. drillers added the most oil rigs in a week since June.

Earlier this week oil, one of Canada’s major exports, reached a more than two-year high of nearly $58.

Still, the Canadian dollar is unlikely to recapture its tight link with the price of oil even as the interest rate outlook settles, given crude trades far removed from levels needed to affect investment in Canada’s energy sector, economists and strategists said.

The loonie has also been helped this week by a speech on Tuesday by Bank of Canada Governor Stephen Poloz which was less dovish than the market had expected.

The currency rose 0.6 percent for the week.

Efforts to revive the Trans-Pacific Partnership (TPP) trade deal foundered on Friday when Canadian Prime Minister Justin Trudeau failed to show up for a meeting to agree a path forward without the United States.

Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR fell 2 Canadian cents to yield 1.463 percent and the 10-year CA10YT=RR declined 27 Canadian cents to yield 1.970 percent.

The 10-year yield touched its highest intraday since Nov. 3 at 1.978 percent.

Canada’s bond market will be closed on Monday in lieu of Remembrance Day.

Reporting by Fergal SmithEditing by Lisa Von Ahn and Sandra Maler