TORONTO: The Canadian dollar strengthened against its US counterpart on Tuesday as oil prices rose and weaker-than-expected US data weighed on the greenback, while a speech by Canada's central bank governor had little impact on the market.
Global trade is likely to grow more slowly than it did in the past, but this should not be taken as a sign of an impending recession, Bank of Canada Governor Stephen Poloz said on Tuesday.
Poloz didn't reveal anything new that would have implications for the currency, said Mazen Issa, senior FX strategist at TD Securities.
There is "a small degree of cautiousness," which is consistent with recent comments from the governor that have tried to "talk down" some of the optimism about the economy that has been generated by domestic data, he said.
Still, the implied probability of a Bank of Canada rate hike this year has increased to 24 percent from near zero before stronger-than-expected retail sales data on Friday, overnight index swaps (OIS) showed. At the start of March, the OIS market had implied a more than 50 percent chance of a cut.
At 9:19 a.m. EDT (1319 GMT), the Canadian dollar was trading at C$1.2640 to the greenback, or 79.11 US cents, stronger than Monday's close of C$1.2686, or 78.83 US cents.
The currency's strongest level of the session was C$1.2626, while its weakest was C$1.2685.
The loonie has rallied 16 percent since falling to a 12-year low in January. Last week, it touched its strongest since July 6 at C$1.2593.
Oil prices rose, boosted by a weaker dollar and by expectations that demand could grow quickly enough to match supply this year. US crude prices were up 1.62 percent to $43.33 a barrel.
Orders for long-lasting US manufactured goods rebounded less than expected in March, suggesting the downturn in the factory sector was far from over.
Canadian government bond prices were mixed across the maturity curve, with the two-year price up 1.5 Canadian cents to yield 0.692 percent and the new benchmark 10-year falling 13 Canadian cents to yield 1.559 percent.
The curve steepened, as the spread between the 2-year and 10-year yields widened by 2.1 basis points to reach its widest since Jan. 19 at 86.7 basis points, indicating underperformance for longer-dated maturities.
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