TORONTO: The Canadian dollar rose to a nearly seven-week high against its US counterpart on Tuesday as investors weighed a possible easing of global trade tensions and after data showed stronger-than-expected growth in the domestic economy.
Canada's economy grew by 0.5 percent in May, the biggest rise in a year, as industries recovered from a combination of bad weather and maintenance shutdowns in April, Statistics Canada said.
"The growth was broad, all of the major sectors were growing solidly," said Ranko Berich, head of market analysis at Monex Canada and Monex Europe, who thinks that markets are underestimating prospects of another Bank of Canada interest rate hike as soon as September.
The central bank raised its benchmark interest rate earlier this month by 25 basis points to 1.50 percent. Chances of another hike in September climbed to one in four from less than 20 percent before the economic data, the overnight index swaps market indicated.
News of a possible easing of tariff tensions between the United States and China helped boost stocks on Wall Street.
Canada runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows.
At 3:57 p.m. EDT (1957 GMT), the Canadian dollar was trading 0.2 percent higher at C$1.3006 to the greenback, or 76.89 US cents.
The currency's weakest level of the session was C$1.3097, while it touched its strongest since June 14 at C$1.2980.
For the month, the loonie was on track to rise 1 percent.
The price of oil, one of Canada's major exports, fell after a survey showed OPEC's output hit a 2018 high in July. US crude oil futures settled nearly 2 percent lower at $68.76 a barrel.
Canadian government bond prices were lower across a steeper yield curve, with the two years down 5 Canadian cents to yield 2.076 percent and the 10-year 34 Canadian cents to yield 2.339 percent.
The 10-year yield touched its highest intraday since May 25 at 2.347 percent, while the gap between it and its US equivalent narrowed by 4.9 basis points to a spread of 62.7 basis points in favor of the US bond.