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Canadian dollar strengthens 0.3% against the greenback
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Domestic economy grows by 0.1% in October
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Price of U.S. oil increases 3%
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10-year yield touches a near six-week high
By Fergal Smith
TORONTO, Dec 23 (Reuters) – The Canadian dollar strengthened to its highest level in more than one week against its U.S. counterpart on Friday, as equity markets seesawed and domestic data showed the economy still growing despite sharply higher borrowing costs in recent months.
The loonie was trading 0.3% higher at 1.3605 to the greenback, or 73.50 U.S. cents, to close out the last full trading week of the year.
It touched its strongest intraday level since Dec. 15 at 1.3564, while it was up 0.7% for the week after posting declines in the three previous weeks.
“The Canadian dollar continues to be at the mercy of equity market volatility, of which there was a lot this week,” said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
Wall Street’s main indexes swung between gains and losses after data showed U.S. inflation cooling further in November but likely not enough to discourage the Federal Reserve from sticking to its campaign to raise interest rates.
Higher prices for oil, one of Canada’s major exports, added to support for the loonie. U.S. crude futures were up 3% at $79.82 a barrel.
The Canadian economy grew by 0.1% in October and is expected to expand at the same pace in November, a sign that the full impact of Bank of Canada rate increases since March has yet to play out.
Canada’s economy is likely to be particularly sensitive to higher rates after Canadians borrowed heavily to buy houses during the COVID-19 pandemic.
Investors seem to be betting on it, with the loonie headed for its first annual decline since 2018. It has lost 7.1% since the beginning of the year.
Canada’s 10-year yield touched its highest since Nov. 14 at 3.190% before dipping to 3.175%, up 9.4 basis points on the day. (Reporting by Fergal Smith; editing by Jonathan Oatis and Alistair Bell)
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