The commodity-linked Canadian dollar strengthened to a two-year high against its U.S. counterpart on Thursday as investors bet that the rollout of COVID-19 vaccines would boost economic recovery.
“The Canadian dollar has been etching out fresh highs each day this week as markets front-run their expectations of the economic recovery accelerating in 2021,” said Simon Harvey, FX market analyst for Monex Europe and Monex Canada.
Vaccine headlines are driving investor optimism, Harvey said.
Canadian health authorities could approve Pfizer Inc’s coronavirus vaccine within the next week, allowing distribution to start in early 2021, medical officials indicated. [nL1N2IJ1WB]
World equity benchmarks rose and the price of oil, one of Canada’s major exports, settled 0.8% higher at $45.64 a barrel. Sources said OPEC and Russia agreed to a modest output increase from January of 500,000 barrels per day.
The Canadian dollar was trading 0.5% higher at 1.2858 to the greenback, or 77.77 U.S. cents. The currency touched its strongest intraday level since October 2018 at 1.2852.
The U.S. dollar plunged to its weakest level in more than 2-1/2 years. In addition to optimism about vaccines, signs of progress toward U.S. fiscal stimulus kept investors upbeat, weighing on the safe-haven U.S. currency.
Canada’s jobs report for November is due on Friday, which could help guide expectations for the Bank of Canada policy outlook. The central bank, which has cut its benchmark interest rate to a record low of 0.25%, is due to make a policy decision next week.
The jobs data could show deterioration in the near-term outlook for Canada’s economy, Harvey said. Canada is in the second wave of the pandemic, which has led to restrictions on businesses.
Canadian government bond yields were mixed across a flatter curve, with the 10-year down 1.3 basis points at 0.747%. On Wednesday, it touched a near three-week high intraday at 0.780%. (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney) (([email protected]; +1 647 480 7446;)) Keywords: CANADA FOREX/ (UPDATE 1)