The Canadian dollar strengthened against its U.S. counterpart on Thursday, a day after the Federal Reserve gave up hope of a rate cut in March, benefiting from recovering stock prices.
The loonie rose 0.4% to 1.3375, or 74.77 U.S. cents, to the dollar, after moving from 1.3368 to 1.3464.
Tony Valente, senior forex trader at AscendantFX, said the currency was performing particularly strongly with the performance of US stocks.
“US stocks are up across the board, and so is the CAD,” Valente said.
Wall Street rose after a sell-off on Wednesday, focused on intraday earnings from big tech companies. Canada provides 75% of its exports to the US.
The loonie's gains came close to a three-week high hit on Wednesday following a better-than-expected release of Canadian domestic product.
Domestic data showed signs of a bottom-line decline in the manufacturing sector on Thursday. The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) rose to a seasonally adjusted reading of 48.3 in January, the lowest since May 2020, after falling to 45.4 in December.
Bank of Canada Governor Tiff Macklem said the new developments could boost inflation, meaning the central bank would need to raise interest rates even more.
Canadian government bond yields have fallen across the curve, tracking U.S. government bond yields.
The 10-year note fell 3.3 basis points to 3.286%, while the U.S. benchmark fell 5 basis points to 59.6 basis points, its lowest since Oct. 5. (Reporting by Fergal Smith; Editing by Leslie Adler)
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