Canadian dollar stronger as oil rises
The Canadian dollar strengthened against its US counterpart on Tuesday. The currency was helped by increased oil prices and improved global risk sentiment as Britain got a new prime minister, Japan got stimulus and US outlook brightened.
The gains reversed Monday’s weakness in the loonie (the colloquial name for the Canadian dollar).
"It's based on an overall pick up in risk appetite," said Scott Smith, senior market analyst at Cambridge Global Payments in Toronto. "That has helped levitate equities, risk-correlated assets, oil is up over 4 percent on the day, so that has been one of the main drivers for the loonie."
The Canadian dollar rested at 1.3030 Canadian dollars to the greenback, a lot stronger than the Bank of Canada's official Monday close of 1.3121 Canadian dollars.
The currency's strongest level of the session was 1.2982 Canadian dollars, while its weakest level was 1.3131 Canadian dollars.
Oil increased by 5 percent, its biggest daily gain since April. It’s worth noting that some of that was attributed to investors covering short positions as concerns about a supply gut persisted.
It is likely that The Bank of Canada will sound a dovish tone but hold rates steady when it presents its quarterly monetary policy report on Wednesday. It’s also likely to point to global uncertainties like Brexit and indebted consumers at home as economic risks.
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