The Canadian dollar CADUSD weakened against its U.S. counterpart on Friday but held on to most of its weekly advance as oil prices rose and investors took stock of recent strength in the domestic economy.
The loonie was trading 0.2% lower at 1.3365 to the greenback, or 74.82 U.S. cents, after earlier touching its strongest level since Feb. 14 at 1.3303. For the week, it was up 1.1%.
“The Canadian economy seems like its in pretty good shape,” said Edward Moya, senior market analyst at OANDA in New York.
“The labour market has been very strong and while there’s still uncertainty as to how strong disinflation trends remain, there is still a lot of optimism about the economy.”
The Bank of Canada on Wednesday raised its growth forecast for 2023 to 1.4% from 1.0% in January as it left its benchmark interest rate on hold at 4.50%.
The governing council of the BoC discussed raising rates at its policy meeting before deciding to leave them on hold, the central bank’s governor, Tiff Macklem, said on Friday.
It helps that one of Canada’s key exports is oil, Moya said.
Oil settled 0.4% higher at $82.52 a barrel, adding to its recent gains, after the West’s energy watchdog said global demand will hit a record high this year.
One area of weakness for Canada’s economy in recent months has been the housing market. But data on Friday showed that home sales rose 1.4% in March from February, the second straight month of higher sales.
Canadian bond yields rose across the curve, tracking the move in U.S. Treasuries, as hopes faded of an early pause in Federal Reserve rate hikes.
The 10-year touched its highest since March 10 at 3.074% before dipping to 3.038%, up 6.7 basis points on the day.