C$ resilient to oil fall as Fed weighs on greenback

TORONTO: The Canadian dollar firmed against the greenback on Thursday as its US counterpart was pressured after the Federal Reserve stopped short of signaling an imminent US interest rate hike, while investors eyed domestic economic data due on Friday.

The loonie, as the Canadian currency is colloquially known, has held relatively firm against the falling price of oil, a major Canadian export, this week as currency markets focus on global central bank moves.

"Despite oil moving down and while we're awaiting GDP data tomorrow that will be significantly negative, the market is not pricing in any sort of move by the Bank of Canada, that's very unusual," said Jimmy Jean, an economic strategist at Desjardins.

The Canadian dollar settled at C$1.3161 to the greenback, or 75.98 US cents, stronger than the Bank of Canada's official Wednesday close of C$1.3191, or 75.81 US cents.

The currency's strongest level of the session was C$1.3101, while its weakest was C$1.3193.

The US central bank left interest rates unchanged on Wednesday and said the near-term risks to the US economic outlook had diminished. While that opened the door to another rate hike, the Fed gave no firm indication it would do so at its next meeting in September. The US dollar was off 0.4 percent against a basket of currencies.

The Japanese yen eased after Reuters reported the Bank of Japan was considering expanding monetary stimulus under pressure from the government to address signs of weak inflation.

Desjardins' Jean said any easing move from the Bank of Japan would likely push the US dollar higher, leading to Canadian dollar weakness.

A particularly weak reading from Canada's gross domestic product data for May due on Friday could also hurt the loonie. Economic growth is expected to have declined 0.4 percent in May, hurt by disruptions caused by wildfires in Alberta.

Oil prices fell to their lowest since April, with US crude headed for its biggest monthly loss in a year, on growing worries that the world was pumping more crude than needed.

Canadian government bond prices were lower at the short end of the maturity curve and higher further out, with the two-year price down 1.5 Canadian cent to yield 0.586 percent and the benchmark 10-year rising 7 Canadian cents to yield 1.069 percent.

The Canada-US two-year bond spread narrowed to -12.5 basis points, while the 10-year spread was -43.7 basis points.