US Markets
SPX

CANADA FX DEBT-Canadian dollar rebounds from 10-day low as oil rallies

Credit: REUTERS/Mark Blinch

The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil prices rose and investors awaited an interest rate decision by the Bank of Canada, with the currency recouping much of the previous day's decline.

(Adds strategist quotes and details throughout; updates prices)

* Canadian dollar rises 0.4% against the greenback

* Loonie trades in a range of 1.3142 to 1.3212

* Price of U.S. oil settles 2.6% higher

* Canadian bond yields ease across much of a flatter curve

By Fergal Smith

TORONTO, Oct 27 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil prices rose and investors awaited an interest rate decision by the Bank of Canada, with the currency recouping much of the previous day's decline.

Canada's central bank is due to make an interest rate decision and update its economic outlook on Wednesday. The central bank has said it will leave rates at a record low of 0.25% until its 2% inflation target is achieved sustainably, which it does not expect for at least two years.

With the Bank of Canada on the sidelines, the Canadian dollar's prospects "increasingly lie with broader risk sentiment," said Tony Valente, a senior FX dealer at AscendantFX.

The one-month rolling correlation between the loonie and the benchmark S&P 500 has climbed to 0.8 from 0.3 in early October, Refinitiv Eikon data showed, indicating the currency and the stock market are moving largely in the same direction.

Wall Street's main indexes steadied on Tuesday following the S&P 500's worst day in a month, while U.S. crude oil futures settled 2.6% higher at $39.57 a barrel as companies shut down some U.S. Gulf of Mexico oil production ahead of an approaching storm.

Oil is one of Canada's major exports. The move higher in crude prices helped the loonie "to catch a bid," Valente said.

The Canadian dollar was trading 0.4% higher at 1.3159 to the greenback, or 75.99 U.S. cents, having traded in a range of 1.3142 to 1.3212.

On Monday, the currency hit a 10-day low at 1.3225 as surging coronavirus cases and doubts about a U.S. coronavirus relief package weighed on investor sentiment.

Canadian government bond yields were lower across much of a flatter curve in sympathy with U.S. Treasuries on Tuesday. The 10-year fell 2.2 basis points to 0.606%. (Reporting by Fergal Smith Editing by Nick Zieminski and Jonathan Oatis) ((fergal.smith@thomsonreuters.com; +1 647 480 7446;)) Keywords: CANADA FOREX/ (UPDATE 1)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SPX RY

Latest Markets Videos

    Reuters

    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

    Learn More