TORONTO (Reuters) - The Canadian dollar strengthened to a near three-month high against its U.S. counterpart on Tuesday as investors bet on global economic recovery and ahead of an interest rate decision by the Bank of Canada on Wednesday.
The loonie CAD= was trading 0.4% higher at 1.3517 to the greenback, or 73.98 U.S. cents. The currency touched its strongest intraday level since March 9 at 1.3483.
Gains for the loonie show that “markets are looking toward a brighter future,” said Michael Goshko, corporate risk manager at Western Union Business Solutions.
Canada runs a current account deficit and is a major producer of commodities, including oil, so its economy could particularly benefit from a pickup in the global flow of trade and capital.
U.S. crude oil futures CLc1 settled 3.9% higher at $36.81 a barrel on hopes that major crude producers will agree to extend output cuts and as countries and U.S. states begin to reopen after coronavirus lockdowns.
The recovery effort bolstered world stocks .WORLD, winning out over U.S.-China tensions and the worst civil unrest in the United States in decades.
“As equities continue to surge higher, the U.S. dollar continues to decline against most currencies, unwinding the safe haven trade,” Goshko said.
Economists say that Canada’s economy likely bottomed out in April when non-essential businesses across the country were closed to help contain the coronavirus pandemic. Attention has been turning to how fast the economy can recover and the potential level of fiscal and monetary policy support.
The Bank of Canada is expected to hold interest rates at a record low of 0.25% on Wednesday, when Tiff Macklem will begin his seven-year term as governor of the central bank.
Reporting by Fergal Smith; editing by Jonathan Oatis and Cynthia Osterman
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