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Canadian dollar rises as investors eye further cuts to BoC stimulus

06/10/2021 | 04:01pm EDT
FILE PHOTO: A Canadian dollar coin, commonly known as the

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Thursday, as oil prices rose and comments from a senior Bank of Canada policymaker supported expectations for further reduction of stimulus from the central bank as soon as next month.

The loonie was trading 0.2% higher at 1.2090 to the greenback, or 82.71 U.S. cents, after touching its weakest level since last Friday at 1.2127.

The currency has been the top performing Group of 10 currency this year, gaining 5.3% against the greenback. It has been bolstered by higher commodity prices and the Bank of Canada's more hawkish stance, including a reduction in the pace of bond purchases.

BoC Deputy Governor Timothy Lane said that recent data show signs of increasing resilience in the economy that bodes well for the recovery.

"If all goes well, the next few weeks could set us up for further tapering as soon as July," said Sri Thanabalasingam, a senior economist at TD Economics.

With COVID-19 vaccinations rolling out and new cases tumbling, Canadian provinces are loosening economic restrictions.

The price of oil, one of Canada's major exports, rose to its highest level since October 2018 after a drop in new U.S. unemployment claims supported expectations for strong demand. U.S. crude oil futures settled 0.5% higher at $70.29 a barrel.

The much-anticipated U.S. consumer price index report signaled that the current inflation wave will be transitory, weighing on the U.S. dollar and bond yields.

Canadian government yields eased across a flatter curve, tracking the move in U.S. Treasuries. The 10-year fell as much as 2.7 basis points to 1.384%, its lowest level since March 11.

(Reporting by Fergal Smith; Editing by Paul Simao and David Gregorio)

By Fergal Smith

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) -0.31% 0.92996 Delayed Quote.-4.43%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) -0.27% 1.71595 Delayed Quote.-1.17%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) -0.28% 89.114 Delayed Quote.11.22%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) 0.02% 0.74351 Delayed Quote.6.55%
EURO / CANADIAN DOLLAR (EUR/CAD) 0.13% 1.47197 Delayed Quote.-5.21%
NEW ZEALAND DOLLAR / CANADIAN DOLLAR (NZD/CAD) -0.40% 0.86245 Delayed Quote.-4.95%
S&P GSCI CRUDE OIL INDEX -0.09% 385.4542 Delayed Quote.48.29%
US DOLLAR / CANADIAN DOLLAR (USD/CAD) 0.13% 1.23614 Delayed Quote.-3.52%
WTI -0.36% 70.6 Delayed Quote.48.31%
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