The Canadian dollar CADUSD strengthened against its U.S. counterpart for a sixth straight day on Tuesday as money markets bet that the Bank of Canada would be just as aggressive as the Federal Reserve in hiking interest rates.
The loonie was up 0.1% at 1.2575 to the greenback, or 79.52 U.S. cents, after trading in a range of 1.2572 to 1.2623.
It was the sixth straight day of gains for the currency, its longest winning run since March 2021. On Monday, it touched its strongest intraday level since Jan. 26 at 1.2562.
“In the wake of last week’s FOMC (Federal Open Market Committee meeting), we have seen the rise in Canadian interest rates mirror that in the U.S. and oil has remained above $100 a barrel,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
“The market is finally buying the loonie on the back of higher oil prices.”
Oil, one of Canada’s major exports, settled 0.3% lower on Tuesday at $111.76 a barrel but has surged this year on disruptions to global supply after Russia’s invasion of Ukraine.
Both the BoC and the Fed are expected to raise interest rates by about 190 basis points further in 2022 after they hiked this month for the first time since before the pandemic.
Removing a headwind to economic activity, Canada’s second-largest railroad will resume operations on Tuesday as it agreed to settle a labour dispute with the union representing its conductors and engineers through arbitration.
Meanwhile, Canada priced its first green bond in a move that is likely to set a benchmark in the Canadian market for climate-friendly bonds and could support the country’s transition to a greener economy.
The Canadian 10-year yield touched its highest level since November 2018 at 2.412%, up 8.5 basis points on the day.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.