C$ climbs to 8-week high as investors buy 'growth' currencies

·2-min read
FILE PHOTO: New Canadian five and 10 dollar bills, made of polymer, are displayed with the previously released 20, 50 and 100 dollar notes in Ottawa

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened to its highest level in nearly two months against its U.S. counterpart on Wednesday as oil prices rose and investors took in stride data showing U.S. inflation rose strongly in December.

The loonie was trading 0.6% higher at 1.2505 to the greenback, or 79.97 U.S. cents, after touching its strongest intraday level since Nov. 16 at 1.2495.

"We're seeing the U.S. dollar broadly set back," said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. "So the currencies that are levered toward growth - Norway, the dollar-bloc - are all outperforming."

Wall Street rose and the U.S. dollar fell against a basket of currencies. Data showed U.S. consumer prices rising solidly in December but in line with economists' expectations, easing some concern about faster-than-expected policy tightening by the Federal Reserve.

The so-called dollar-bloc currencies, which include the Australian and New Zealand dollars as well as the Canadian dollar, are known for their sensitivity to moves in commodity prices. Like Canada, Norway is a major producer of oil.

Oil added to recent gains on tight supply and easing concerns about the potential hit to demand from the Omicron coronavirus variant. U.S. crude prices settled 1.75% higher at $82.64 a barrel.

On Tuesday, the Canadian dollar broke the neckline of a head-and-shoulders trend reversal pattern at about 1.2600.

That move gave rise to a "measured objective" of 1.2250, Chandler said, referring to a technique in technical analysis for identifying a target.

Canadian government bond yields rose across the curve, with the 10-year up 1.7 basis points at 1.720%. On Monday, it touched its highest level in more than six weeks at 1.753%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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