The Canadian dollar strengthened against its US counterpart on Wednesday as oil rose, while American inflation data pressured the greenback ahead of an expected interest rate increase by the Federal Reserve. The price of oil, one of Canada's major exports, climbed as industry data showed a larger-than-expected drawdown in US crude stockpiles, while expectations for an extended shutdown of a major North Sea crude pipeline also continued to bolster markets.
US crude prices were up 0.7 percent at $57.55 a barrel. The US dollar fell against a basket of major currencies after data showed a rise in core inflation that was short of economists' forecasts.
At 8:49 am ET (1349 GMT), the Canadian dollar was trading at C$1.2841 to the greenback, or 77.88 US cents, up 0.2 percent. The currency traded in a range of C$1.2822 to C$1.2882. On Tuesday, the loonie touched its weakest since December 1 at C$1.2893. It had been pressured by the Bank of Canada's dovish tone last week after it left its benchmark interest rate steady at 1 percent.
Bank of Canada Governor Stephen Poloz is due to speak on Thursday. Canadian home prices fell again in November, the third straight monthly decline and the largest November drop outside of a recession, as Toronto prices fell for the fourth month and Vancouver prices were flat, data showed on Wednesday.
Canadian government bond prices were mixed across the yield curve, with the two-year down 1.5 Canadian cents to yield 1.529 percent and the 10-year flat to yield 1.866 percent. The gap between the 10-year yield and its US equivalent narrowed by 2.8 basis points to a spread of -50.8 basis points.