Canadian dollar posts 10-day high as Trump comments pressure greenback

OTTAWA (Reuters) - The Canadian dollar rose to a 10-day high against its U.S. counterpart on Monday, as oil prices climbed and U.S. President Donald Trump said he disagreed with the U.S. Federal Reserve’s decision to raise interest rates.

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 U.S. dollar .DXY fell against a basket of major currencies as Trump showed his displeasure with Fed tightening.

“I think it is mostly a (U.S.) dollar move today,” said Erik Nelson, a currency strategist at Wells Fargo. “I suspect what is probably contributing to that is some of these comments from Trump around his lament for the higher interest rates from the Fed.”

The price of oil, one of Canada’s major exports, rose as investors grew more concerned about an expected fall in supply from Iran because of U.S. sanctions and worried less that a trade war between the United States and China would hurt economic growth.

U.S. crude oil futures CLc1 settled 0.8 percent higher at $66.43 a barrel.

Investors will be closely watching this week’s trade talks between the United States and China for clues to whether the two countries can resolve an escalating tariff war that threatens to engulf all trade between the world’s two largest economies.

Canada exports many commodities and runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows.

At 3:28 p.m. (1928 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent higher at C$1.3050 to the greenback, or 76.63 U.S. cents. The currency touched its strongest level since Aug. 10 at C$1.3046.

It was boosted on Friday by data showing that Canada’s annual inflation rate surged to 3.0 percent in July, its highest level in nearly seven years. The acceleration in inflation raised expectations that the Bank of Canada might raise interest rates again as soon as next month.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 1.5 Canadian cents to yield 2.103 percent and the 10-year CA10YT=RR climbed 12 Canadian cents to yield 2.254 percent.

The gap between the two-year yield and its U.S. equivalent narrowed by 2.1 basis points to a spread of 48.8 basis points in favor of the U.S. bond, its narrowest since May 30.

Reporting by Fergal Smith; Additional reporting by Saqib Iqbal Ahmed; Editing by Jonathan Oatis and Peter Cooney