The Canadian dollar CADUSD steadied against its U.S. counterpart on Tuesday, with the currency holding near key technical levels as oil prices fell and rising bond yields helped underpin the greenback.
The loonie was nearly unchanged at 1.2620 to the greenback, or 79.30 U.S. cents, after trading in a range of 1.2569 to 1.2646.
“It seems to be gravitating toward the 200-day and the 50-day moving averages,” said Michael Goshko, senior market analyst at Convera Canada ULC.
The 200-day moving average for USD-CAD is at 1.2725, while the 50-day is at 1.2650.
You are seeing U.S. bond yields “at or near multiyear highs and that’s pulling investor interest into the (U.S.) dollar overall,” Goshko added.
The U.S. dollar climbed to a two-year high against a basket of major currencies as investors bet on aggressive interest rate hikes by the Federal Reserve to tamp down inflation.
Meanwhile, the price of oil fell 5.2% to $102.60 a barrel after the International Monetary Fund reduced economic growth forecasts, raising concerns about demand. Oil is one of Canada’s major exports.
Investors also weighed data showing signs of cooling in Canada’s red-hot housing market.
The average home price fell 2.5% from February and sales dropped 5.4%, while separate data showed housing starts falling 2%.
Canada’s inflation report for March is due on Wednesday which could offer clues on the Bank of Canada policy outlook.
Canadian government bond yields were higher across a flatter curve, tracking the move in U.S. Treasuries. The 10-year
touched its highest level since July 2011 at 2.836% before dipping to 2.832%, up 3.4 basis points on the day.
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