Canadian dollar gets a 'lifeline' as oil rallies
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
By Fergal Smith
TORONTO (Reuters) – The Canadian dollar was little changed against its U.S. counterpart on Thursday as oil rallied and investors turned attention to domestic retail sales data, with the currency steadying after it hit a five-week low the day before.
The loonie was nearly unchanged at 1.3500 to the greenback, or 74.07 U.S. cents, after trading in a range of 1.3481 to 1.3527.
On Wednesday, the currency touched its weakest intraday level since Dec. 13 at 1.3541. It has lost 1.9% since the start of the year.
“The Canadian dollar needed a lifeline from the oil market and finally oil found a bid,” said Adam Button, chief currency analyst at ForexLive.
The price of oil, one of Canada’s major exports, rose as the International Energy Agency forecast strong growth in global oil demand and as cold winter weather disrupted U.S. crude output while the government reported a big weekly draw in crude inventories.
U.S. crude oil futures settled 2.1% higher at $74.08 a barrel, while the U.S. dollar added to recent gains against a basket of major currencies after U.S. labor market data showed job growth, keeping expectations for a rate cut from the Federal Reserve in check.
Canadian retail sales data for November, due on Friday, will be the last major piece of domestic economic data ahead of next week’s interest rate decision by the Bank of Canada. Economists expect sales to dip 0.1%.
“In all likelihood, Friday’s retail sales report will underscore the divergence between the Canadian and U.S. consumer and ultimately that flows into the currency more than anything,” Button said.
Canadian government bond yields were higher across the curve. The 10-year was up 3.7 basis points at 3.480%, after earlier touching its highest level since Dec. 1 at 3.507%.
(Reporting by Fergal Smith; Editing by Alistair Bell)