Canadian dollar rallies 1% as legislators approve economic stimulus

TORONTO (Reuters) - The Canadian dollar climbed to a five-day high on Wednesday as the country’s legislators approved a stimulus package to help ease the economic impact of the coronavirus outbreak.

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

Canada’s C$27 billion aid package will give people affected by the outbreak C$2,000 a month and delay student loan repayments, among other measures, Prime Minister Justin Trudeau said.

“The Canadian government wrote itself a blank cheque to fight the coronavirus and that is an incredibly powerful tool,” said Adam Button, chief currency analyst at ForexLive. “At some point the markets are going to focus on which countries can weather this storm best.”

At 31%, Canada’s federal debt as a share of the economy is low compared to some other major countries.

At 12:27 p.m. (1627 GMT), the Canadian dollar CAD=D4 was trading 1% higher at 1.4314 to the greenback, or 69.86 U.S. cents.

The currency touched its strongest intraday level since last Friday at 1.4298. It was the second best G10 currency after Norway's crown NOK=.

U.S. senators will vote on Wednesday on a $2 trillion bipartisan package of legislation to alleviate the devastating economic impact of the coronavirus pandemic. The U.S. dollar .DXY fell as the U.S. package steadied money market nerves and prompted investors to buy back into 'riskier' currencies.

Canada is a major exporter of commodities, including oil, which has been pummeled by demand destruction related to the virus and a price war between major producers. U.S. crude CLc1 prices were flat at about $24 a barrel.

“I think the drama for the Canadian dollar remains in oil,” Button said.” “Crude is barely hanging on as are Canadian producers.”

Canadian bond yields fell across a flatter curve. The 10-year was down 7.6 basis points at 0.795%.

Reporting by Fergal Smith; Editing by Bernadette Baum and Tom Brown