TORONTO: The Canadian dollar strengthened against its US counterpart on Wednesday, rebounding from a two-week low the day before, as investors cheered signs that central banks are making progress against inflation.

Shares and bonds rallied worldwide and the safe-haven US dollar fell against a basket of major currencies as a lower inflation reading from France raised hopes that interest rate hikes might be less aggressive than feared.

It follows encouraging German inflation data earlier in the week.

Minutes from the US Federal Reserve’s December meeting, due at 2 p.m. ET (1900 GMT), could offer further clues on the interest rate outlook.

The Canadian dollar was trading 1.1% higher at 1.3520 to the greenback, or 73.96 US cents, after trading in a range of 1.3512 to 1.3680. On Tuesday, it touched its weakest intraday level since Dec. 20 at 1.3685.

The loonie gained ground despite pressure on the price of oil, one of Canada’s major exports.

US crude oil futures were down 2.4% at $75.08 a barrel on concerns about weak demand due to the state of the global economy and China’s rising COVID cases.

Investors were also awaiting Canadian jobs data, set for release on Friday, to see if Bank of Canada interest rate hikes have worked to slow the domestic economy.

Money markets see a 60% chance that the central bank would tighten by 25 basis points at its next policy decision on Jan. 25.

Canadian government bond yields were lower across the curve, tracking the move in US Treasuries and German Bunds.

The 10-year eased 4.8 basis points to 3.136%, extending its pullback from Friday’s seven-week high of 3.357%.