(Updates to afternoon market action)
By Richard Leong
July 24 (Reuters) - The Canadian dollar nudged higher versus the greenback on Tuesday in step with higher oil prices, while domestic 10-year government yield reached a five-week peak, supported by the view of solid economic growth.
News that China will adopt a more vigorous fiscal policy to combat slowing economic growth and to counter its current trade tension with the United States renewed appetite for commodities and related investments, analysts said.
“The market tone is suggestive of renewed risk appetite as participants consider China’s latest stimulus measures and their implications for global growth,” ScotiaBank currency strategists wrote in a research note.
Expectations the Bank of Canada would raise key interest rates later this year also buttressed demand for the loonie, and helped lift Canadian yields for a third straight session.
At 3:06 p.m. (1906 GMT), the U.S. dollar was 0.1 percent lower against its Canadian counterpart at C$1.3124, reversing some of its gain on Monday, Reuters data showed.
Canadian bond yields and other major sovereign yields have risen in the wake of a Reuters report on Friday that said the Bank of Japan is debating whether to scale back its easy monetary policy.
The yield on 10-year Canadian government debt was half a basis point higher at 2.227 percent after touching 2.250 percent earlier Tuesday, which was the highest since June 15, according to Reuters data.
In the oil market, U.S. crude futures were up almost 1 percent to settle at $68.52 a barrel as the tension between the United States and Iran highlighted risks to supply and trade disputes raised the prospect of slower economic growth and weaker energy demand.
Reporting by Richard Leong; editing by Jonathan Oatis and Susan Thomas