U.S. dollars and Chinese renminbi notesSEAN YONG
Canada's dollar rose against the greenback Wednesday, rebounding from a recent slide as the price of oil hit a two-year high and stronger U.S. data signalled the economy was ending the year on more solid ground.
Oil, a key Canadian export, rose after news of a drop in U.S. inventories and cold weather on both sides of the Atlantic.
The positive correlation between the performance of global commodity prices and the Canadian dollar appeared to be relevant again after breaking down in the last few sessions.
Also benefiting Canada's risk-related currency, U.S. home resales rose in November and third-quarter gross domestic product got a higher than expected upward revision. The stronger U.S. data encouraged risk takers, a trend that supported stock prices as well as the Canadian dollar.
"If you look at the global macro environment, it's generally better sentiment," said Sacha Tihyani, currency strategist at Scotia Capital.
"It's a bit of a reversal of underperformance over the past couple days, more support of equity prices, surer support of oil, and the fact that the U.S. numbers didn't disappoint."
The Canadian currency closed the North American session at $1.0142 to the U.S. dollar, or 98.60 U.S. cents, up from $1.0175 to the U.S. dollar, or 98.28 U.S. cents, at Tuesday's close.
The Canadian dollar was among the day's best performing major currencies and ended four straight sessions of losses against the greenback.
Mr. Tihanyi said the currency broke out of a very tight trading range Wednesday, but should hold between C$1.01 and C$1.0210 on Thursday.
"We had a couple days of weakness in the Canadian dollar, and there is a threshold through which the market wasn't willing to bring it past, and I think that was probably seen as a good value level to buy Canadian dollars in the near term," he said.
"In the big scheme of things, the Canadian dollar remains in a pretty good uptrend. Canada's going to grind higher but there won't be enough gas to push through par [with the U.S. dollar]before year-end," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange.
Scotia's Mr. Tihanyi said that given the seasonal light volumes, the currency's direction may be driven more by flows - even relatively small orders - than anything else, and recent year-end trends have favoured the U.S. dollar over Canada's.
Traders will now turn their attention to Canada's gross domestic product figures for October, due Thursday. It's the last major piece of data before the Christmas and New Year holidays.
With riskier assets back in play, Canadian bond prices fell, tracking U.S. Treasuries after the U.S. Federal Reserve completed its last purchases until next week, and ahead of new supply.
The two-year bond was down 6 cents (Canadian) to yield 1.658 per cent, while the 10-year bond shaved off 15 cents to yield 3.160 per cent.