TORONTO (Reuters) – The Canadian dollar extended a 14-month high against its U.S. counterpart on Thursday as oil prices rose and the greenback fell against a basket of major currencies, with analysts looking to Friday’s domestic data for clues on the rally’s next move.
The loonie, as the currency is colloquially known, has strengthened steadily since June, when the Bank of Canada took a more hawkish turn, with the move getting fresh legs after the central bank hiked interest rates last week.
At the time, the central bank said it needed to look through soft inflation data and would wait for more economic data before committing to its next move, making June inflation and May retail sales data due out on Friday key to the short-term trend. ECONCA
“The Canadian dollar is riding high, but it won’t last forever, and any signs of weakness in inflation and in consumer spending could cause a sharp reversal,” said Adam Button, currency analyst at ForexLive in Montreal.
At 4 p.m. ET (2000 GMT), the Canadian dollar CAD=D4 was trading at C$1.2588 to the greenback, or 79.44 U.S. cents, up 0.1 percent.
The currency traded in a range of C$1.2541, its strongest since early May 2016, and C$1.2640.
Button said two strong prints on Friday could push the currency to its strongest since mid-2015, while a negative month-on-month inflation number could push it back up toward C$1.28.
The U.S. dollar .DXY gave up earlier gains after a regional gauge of business conditions fell to an eight-month low and as comments by European Central Bank President Mario Draghi boosted the euro.
Prices for oil, a major Canadian export, settled lower in choppy trading as nagging worries about abundant global crude supplies sank prices after an early rally boosted Brent above $50 per barrel for the first time since June 7.
Canadian government bond prices were higher across the yield curve, with the two-year CA2YT=RR up 2.4 Canadian cents to yield 1.242 percent and the 10-year CA10YT=RR rising 14 Canadian cents to yield 1.882 percent.
Last week, the 10-year yield touched its highest since December 2014 at 1.948 percent.
Additional reporting by Fergal Smith; Editing by Meredith Mazzilli and James Dalgleish