Canadian dollar hits three-week high as oil surges

The Canadian dollar strengthened against its firmer U.S. counterpart on Wednesday as oil prices jumped on prospects of an OPEC output cut and data showed the domestic economy grew in the third quarter at the fastest pace in more than two years.

Gross domestic product grew at an annualized 3.5 percent, slightly exceeding economists’ expectations of 3.4 percent and picking up from a contraction of 1.3 percent in the second quarter, data from Statistics Canada showed.

READ MORE: Oil prices rally as OPEC nears deal to slash oil output

“The Canadian dollar was getting a nice lift in any event from talk about an OPEC deal, that’s the much bigger influence today, but on balance this is basically pushing on an open door and should provide some further support for the (Canadian) dollar today,” said Doug Porter, chief economist at BMO Capital Markets.

Monthly data showed the economy grew 0.3 percent in September, which was also stronger than economists had expected.

1:36 Federal government approves Kinder Morgan Trans Mountain pipeline

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• Federal government approves Line 3 replacement project
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“The three-tenths (gain) is setting you up for solid growth in the fourth quarter,” said Paul Ferley, assistant chief economist at Royal Bank of Canada. “It’s going to reduce the prospect of any near-term easing by the Bank of Canada.”

READ MORE: Justin Trudeau halts Northern Gateway, approves Kinder Morgan expansion, Line 3

U.S. crude prices jumped more than 7 percent to $48.54 a barrel as some of the world’s largest oil producers agreed to curb oil output for the first time since 2008.

At 9:24 a.m. EDT, the Canadian dollar was trading at C$1.3405 to the greenback, or 74.60 U.S. cents, stronger than Tuesday’s close of C$1.3437, or 74.42 U.S. cents.

WATCH: What an OPEC oil production agreement means for Canada 

2:13 OPEC cuts oil production, what does this mean for Canada?

The currency’s weakest level of the session was C$1.3451, while it touched its strongest since Nov. 9 at C$1.3357.

Approval by Canada on Tuesday of Kinder Morgan Inc’s hotly contested plan to build a pipeline from the Alberta oil sands to the Pacific coast was seen by some market players as also supportive of the Canadian dollar.

READ MORE: Oil hits 1-month low on concerns OPEC won’t go ahead with planned production cut

The C$6.8 billion project would nearly triple capacity on the artery to 890,000 barrels a day.

Canadian government bond prices fell sharply across a steeper yield curve in sympathy with U.S. Treasuries. The two-year bond fell 5 Canadian cents to yield 0.7 percent and the benchmark 10-year declined 73 Canadian cents to yield 1.593 percent.