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Canadian dollar rebounds from a one-week low as oil rallies

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Thursday as oil prices climbed, with the loonie recovering from an earlier one-week low, which it hit as investors turned more risk averse.

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

The loonie CAD= was trading 0.1% higher at 1.3159 to the greenback, or 75.99 U.S. cents. The currency touched its weakest intraday level since Sept. 9 at 1.3247.

The rally in oil prices helped the loonie rebound, said Ronald Simpson, a global currency analyst at Action Economics.

Reports that OPEC “sees signs of economic recovery in some areas, and signs of easing inventory surpluses” boosted oil, Simpson said. Oil is one of Canada’s major exports.

U.S. crude oil futures CLc1 settled 2% higher at $40.97 a barrel, while U.S. stocks fell as technology-related shares extended a recent slide and as data showed high levels of weekly jobless claims.

Canada lost 205,400 nonfarm payroll jobs in August, the sixth straight month of decline, a report from payroll services provider ADP showed. The report painted a bleaker picture than recent government labor market data.

Canada’s retail sales report for July is due on Friday, which could add to evidence of a robust bounce in economic activity that was flagged by the Bank of Canada last week.

Carolyn Wilkins, the senior deputy governor at the central bank who lost her bid for the top job just four months ago, will not seek a second term, the BoC said.

Canadian government bond yields were little changed across much of the curve, with the 10-year CA10YT=RR trading at 0.573%.

Strategists say that setting a target for bond yields could help the BoC reduce the amount of debt it buys to keep interest rates low, checking a threat to market liquidity after the central bank’s share of bonds more than doubled this year.

Reporting by Fergal Smith; Editing by Andrea Ricci and Jonathan Oatis

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