The Canadian dollar strengthened to a near five-month high against its U.S. counterpart on Wednesday as recent strength in commodity prices helped support the currency, offsetting preliminary domestic data that showed a steep decline last month for factory sales.
The loonie was trading 0.1 per cent higher at 1.3672 per U.S. dollar, or 73.14 U.S. cents, after touching its strongest intraday level since July 25 at 1.3666.
“The broader softening in the USD over the past month has helped lift the CAD but narrower US/Canada spreads, positive economic data surprises - relative to US economic data outcomes - and recent gains in commodity prices are all helping lift CAD sentiment,” Shaun Osborne and Eric Theoret, strategists at Scotiabank, said in a note.
The price of oil, one of Canada’s major exports, edged higher for a sixth straight day as investors weighed the risk of supply disruptions from Venezuela and Russia. U.S. crude futures were up 0.1 per cent at US$58.43 a barrel.
The gap between Canada’s 2-year yield and its U.S. equivalent has narrowed to 94 basis points in favor of the U.S. note from 120 basis points at the end of October, reducing the relative attractiveness of the U.S. currency.
Minutes released on Tuesday of the Bank of Canada’s latest interest rate decision on December 10 showed that policymakers found it hard to predict whether the central bank’s next move would be a hike or cut.
Domestic data added to recent evidence that has pointed to an economic slowdown in the current quarter after a stronger-than-expected increase in third-quarter GDP.
According to a preliminary estimate, factory sales fell 1.1 per cent in November from October on decreases in the transportation equipment and food subsectors.
Canadian bond yields edged lower across the curve, with the 10-year down 1 basis point at 3.408 per cent.
The bond market was set to close early ahead of the Christmas Day and Boxing Day holidays.