TORONTO (Reuters) - The Canadian dollar climbed on Wednesday to its strongest level in nearly six months against its U.S. counterpart, as the prospect of further economic stimulus bolstered the outlook of commodities that Canada exports, which benefit from higher inflation.
The loonie CAD= was trading 0.4% higher at 1.3250 to the greenback, or 75.47 U.S. cents. The currency touched its strongest intraday level since Feb. 21 at 1.3225.
“The Canadian dollar is riding the tailwind of another rally in oil prices and stocks,” said Adam Button, chief currency analyst at ForexLive.
The S&P 500 rallied to finish just short of its February record closing high as investors awaited news on bipartisan talks over the next federal aid bill to help tens of millions of Americans suffering in the coronavirus pandemic.
The combination of fiscal and monetary stimulus means that coming out of the crisis there is going to be “a very strong inflationary impulse that is going to benefit commodities.”
A measure of U.S. underlying inflation increased in July by the most in nearly 30 years amid broad gains in the costs of goods and services, data showed.
Canada is a major producer of commodities, including oil. U.S. crude oil futures CLc1 settled 2.6% higher at $42.67 a barrel after government data showed U.S. oil inventories fell across the board, bolstering hopes that fuel demand in the world's biggest economy will withstand the coronavirus pandemic.
Ontario, Canada’s most populous province and economic engine, projected its budget deficit would widen to a record C$38.5 billion in 2020-2021 as it raised support for the economy ravaged by the coronavirus crisis.
Canadian government bond yields were higher across the curve, with the 10-year CA10YT=RR up 2.6 basis points at 0.603%. It touched its highest intraday level since June 11 at 0.621%.
Reporting by Fergal Smith; Editing by David Gregorio
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