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Canadian dollar posts six-month high as oil-linked currencies lead G10 in August

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

TORONTO (Reuters) - The Canadian dollar climbed to its strongest level in more than six months against the greenback on Thursday, with the recent rally in oil prices helping the loonie to gain ground this month against many of its G10 counterparts.

The loonie CAD= was trading 0.2% higher at 1.3218 to the greenback, or 75.65 U.S. cents. The currency touched its strongest intraday level since Jan. 30 at 1.3188.

It has advanced 1.5% since the start of August, outperforming all the other G10 currencies with the exception of the Norwegian crown NOK=. Both Norway and Canada are major exporters of oil.

“I think there is some catch-up gains going on for the loonie, and that can probably continue as long as the fundamentals remain supportive,” said Erik Nelson, a currency strategist at Wells Fargo.

Currencies such as the euro EUR= and the Australian dollar AUD= outperformed the loonie in July, when the U.S. dollar .DXY slumped against a basket of major currencies.

U.S. crude oil futures CLc1 settled 1% lower on Thursday at $42.24 a barrel after the International Energy Agency lowered its 2020 oil demand forecast. Still, oil was holding near its strongest level since March.

The number of Americans seeking unemployment benefits dropped below 1 million last week for the first time since the start of the COVID-19 pandemic in the United States, signaling a recovery in the job market was on track. Canada sends about 75% of its exports to the United States.

The Canadian manufacturing sales report for June is due on Friday. Economists expect a 16.4% increase in sales, which would add to evidence of domestic economic recovery.

Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR was up 2.6 basis points at 0.637%, having touched its highest since June 10 at 0.642%.

Reporting by Fergal Smith; editing by Jonathan Oatis

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