Oil prices soar lifting Canadian dollar to four-week high

Pumpjacks pump crude oil near Halkirk, Alta., June 20, 2007.
Pumpjacks pump crude oil near Halkirk, Alta., June 20, 2007. THE CANADIAN PRESS/Larry MacDougal

TORONTO – The Canadian dollar strengthened the most in nearly four weeks against its U.S. counterpart on Wednesday as oil prices soared on a deal by major oil producers to limit output.

U.S. crude oil futures settled up $2.38 at $47.05 a barrel after sources told Reuters that the Organization of the Petroleum Exporting Countries has struck a deal to limit crude output at its policy meeting in November.

The OPEC news gave the Canadian dollar a boost after the currency had been pressured recently by soft domestic data and dovish comments from Bank of Canada Governor Poloz, said Amo Sahota, director at Klarity FX.

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The Canadian dollar ended at C$1.3109 to the greenback, or 76.28 U.S. cents, much stronger than Tuesday’s close of C$1.3203, or 75.74 U.S. cents.

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The currency’s weakest level was C$1.3269, while it touched its strongest since Friday at C$1.3087.

The loonie’s 0.7 percent gain was the most since Sept. 2.

The U.S. government reported that U.S. core capital goods orders rose for the third straight month in August, a positive signal for the business investment outlook.

READ MORE: Dollar falls after weak inflation report

A pickup in U.S. business investment would improve the outlook for Canada’s non-energy exports.

However, the market will be cautious about buying much more Canadian dollars ahead of domestic gross domestic product data on Friday, Sahota said.

The economy is expected to have grown by 0.3 percent, which would reinforce expectations that it rebounded in the third quarter after contracting in the second.

Canadian government bond prices were lower across the yield curve, with the two-year down 3.5 Canadian cents to yield 0.516 percent and the benchmark 10-year falling 11 Canadian cents to yield 0.978 percent.

Still, the 10-year yield earlier touched a new historic low intraday at 0.915 percent.

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