TORONTO: The Canadian dollar edged higher against its US counterpart on Tuesday, reversing an early decline as oil prices rose and Federal Reserve Chairman Jerome Powell signaled patience on raising interest rates further.
The US dollar fell to a three-week low in choppy trading as Powell repeated that the US central bank would remain patient on monetary policy, suggesting that it was unlikely to raise interest rates anytime soon.
"The greenback is down across the board," said Ronald Simpson, managing director, global currency analysis at Action Economics. "Oil prices recovered some (ground), so that helps the loonie as well."
US crude oil futures settled 2 cents higher at $55.50 a barrel on signs that OPEC plans to maintain production cuts despite pressure from US President Donald Trump, whose comment criticizing rising crude prices sent the market into a tailspin a day earlier.
Oil is one of Canada's major exports. At 3:08 p.m. (2008 GMT), the Canadian dollar was trading 0.2 percent higher at 1.3164 to the greenback, or 75.96 US cents. The currency, which on Monday reached its strongest level in nearly three weeks at 1.3113, traded in a range of 1.3163 to 1.3236.
Data from the US Commodity Futures Trading Commission and Reuters calculations showed that speculators cut their bearish bets on the Canadian dollar. As of Feb. 12, net short positions had fallen to 37,537 contracts from 42,037 in the prior week.
Over coming days, Canadian markets will watch domestic economic data that could guide expectations for next week's interest rate decision by the Bank of Canada.
Canada's inflation report for January is due on Wednesday and fourth-quarter gross domestic product data is due on Friday.
Canadian government bond prices were higher across the yield curve in sympathy with US Treasuries. The two-year rose 4.5 Canadian cents to yield 1.759 percent and the 10-year climbed 23 Canadian cents to yield 1.868 percent.
A Bank of Canada working group proposes expanding the range of transactions used in the calculation of the Canadian Overnight Repo Rate Average (CORRA) interest-rate benchmark, according to a consultation paper published by the central bank.
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