The Canadian dollar strengthened against the US currency on Thursday, fueled by higher oil prices and gains in equity markets that improved market confidence. The currency finished not too far off the sessions high at C$1.2791 to the US dollar, or 78.18 US cents, up from C$1.2862 to the US dollar, or 77.75 US cents, at Wednesdays close.
The Canadian dollar pushed as low as C$1.2957 to the US dollar, or 77.18 US cents, overnight, and ran close to that level midmorning after the Swiss National Bank said it was intervening in the foreign exchange market and cut interest rates.
But the influence of equity markets took over, spurred by some positive news, and the currency rallied as high as C$1.2767 to the US dollar or 78.33 US cents. Factors such as better-than-expected US retail sales figures, another US bank trumpeting profitability in the first two months of the year, and relief that Standard & Poors credit rating cut for General Electric was just one notch lent some optimism to the marketplace.
The rising price of oil also played a supporting role, gaining 11 percent to above $46 a barrel. Oil is a key Canadian export and the Canadian currency often tracks its movements.
Lately, the currency has also taken to moving in the same direction as equity markets as a barometer of risk appetite. "Crude oil prices are up as well and thats helping, but the main focus is still on equity markets," said George Davis, chief FX Technical Analyst at RBC Capital Markets.
"With those two markets lining up in favour of the Canadian dollar we have seen some follow-through, which is fairly significant especially in the context of Mondays failure to sustain the break above the C$1.30 level." Earlier this week, the currency hit C$1.3066 to the US dollar, its lowest level since September 2004. The currency, however, is likely to remain rangebound ahead of the release of top-tier monthly statistics - jobs and trade - on Friday. Canadian bond prices edged higher on Thursday, following US counterparts, as demand in a US auction for 30-year bonds was well-received.
The 30-year bond climbed 55 Canadian cents to C$123.92 to yield 3.637 percent. The US 30-year bond yielded 3.622 percent. But gains were curbed by a sharp rise in equity markets. With little Canadian economic news so far this week, Canadian government debt has turned to global news for direction. Fridays Canadian monthly jobs and trade data remain the major risk.