The Canadian dollar strengthened against its U.S. counterpart on Monday, before giving back some of its early gains, as oil prices soared following a weekend attack on Saudi Arabian oil facilities.
U.S. crude oil futures settled 14.7 per cent higher at $62.90 a barrel, the largest one-day percentage gain since December 2008, after an attack on sites run by state-owned Saudi Aramco halved the kingdom’s oil production. Oil is one of Canada’s major exports.
“I would say the reaction of the loonie has been in line with the rest of FX, whereby we saw some strengthening in the oil currencies, but it has been pretty tame,” said Alvise Marino, a foreign exchange strategist at Credit Suisse in New York.
“Markets are in a wait and see mode to see what the response to this Aramco attack is.” Marino added.
U.S. President Donald Trump said it looked like Iran was responsible for attack over the weekend, but he was in no rush to respond and was still trying to find out who was behind it.
At 3:32 p.m. (1932 GMT), the Canadian dollar was trading 0.4 per cent higher at 1.3240 to the greenback, or 75.53 U.S. cents. The Russian ruble , another oil-linked currency, rose about 0.6 per cent, while the Norwegian krone was up about 0.4 per cent.
The loonie, which on Friday hit its weakest intraday level since Sept. 4 at 1.3291, traded in a range of 1.3208 to 1.3271.
The spike in crude prices came as investors awaited the outcome of the Federal Reserve’s next policy meeting on Wednesday. The Fed is widely expected to ease interest rates and signal its future policy path.
Meanwhile, Canadian homes sales rose 1.4 per cent in August from July, the sixth consecutive month of increased activity, according to the Canadian Real Estate Association.
Separate data, from Statistics Canada, showed that foreign investors reduced their holdings of Canadian securities by C$1.2 billion in July, while Canadian investment in foreign securities increased by C$12.5 billion.
Canada’s inflation report for August is due on Wednesday, which could help guide expectations for the Bank of Canada’s interest rate outlook.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The 10-year
rose 34 Canadian cents to yield 1.475 per cent.
On Friday, the 10-year yield touched its highest since July 19 at 1.521 per cent.
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