The Canadian dollar CADUSD strengthened against its U.S. counterpart on Wednesday, recovering from an earlier five-day low, as China’s manufacturing purchasing managers’ index (PMI) rose to its highest level in more than a decade, boosting commodity prices.
The loonie was trading 0.3% higher at 1.36 to the U.S. dollar, or 73.53 U.S. cents, after touching its weakest intraday level since Friday at 1.3659.
“It has been at the mercy of oil volatility,” said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull. “It’s found a lot of support from the really good PMIs out of China.”
The price of oil, one of Canada’s major exports, settled 0.8% higher at $77.69 a barrel as China’s manufacturing activity expanded at its fastest pace since April 2012. China is a major importer of oil.
Canadian manufacturing activity also expanded at a faster pace in February. The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 52.4 in February from 51.0 in January, posting its highest level since July.
The gain for the loonie came as the U.S. dollar fell against a basket of major currencies after regional German inflation data signalled price pressures remain high, boosting the euro.
Still, the loonie has fallen about 2% from its strongest level in February.
“The trend is not really friendly for CAD right now,” Bregar said. “Today is a nice bounce, but we need to see more to get momentum behind CAD.”
Canadian government bond yields rose across the curve, tracking the move in U.S. Treasuries. The 10-year was up 7.8 basis points at 3.416%, moving closer to the three-month high it touched on Monday at 3.465%.