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OFF THE CHART

Canadian Press

The Canadian dollar slumped below 69 cents (U.S.) in January. Now, it's among the top-performing currencies of 2016. What's behind the big rebound?

For the Canadian dollar, it's been a tale of two years.

In 2015, the loonie was among the world's worst-performing major currencies.

The trend continued in the opening weeks of 2016, with the loonie tumbling to a low close of 68.59 cents (U.S.) against its American counterpart in January.

But since then, the Canadian dollar has been riding a strong rally, and it's now trading well above 75 cents.

Most major currencies have weakened against the loonie this year.

So what's behind the rebound?

First, look to oil and commodity prices. "The bounce has been more recently fueled by the sudden reversal in oil, and now other resource prices are getting into the act," said Douglas Porter, chief economist at BMO Nesbitt Burns, in a recent note.

Indeed, Brent crude is trading around $40 (U.S.) a barrel after spending a chunk of this year below $30. Prices are climbing in advance of a potential output freeze from major producers, including Russia and Saudi Arabia.

Also helping crude is that bets against oil are on the decline as speculators close their short positions.

Another factor is the U.S. dollar, which has shown weakness of late. Bloomberg's U.S. Dollar Index, which indicates the general international value of the greenback, has edged lower this year.

Finally, there had been downward pressure on the loonie due to divergent rate paths for Canada and the U.S., but much has changed in recent weeks.

The Federal Reserve's projections signalled four interest-rate hikes for this year, but traders see that outcome as increasingly unlikely. And in early January, expectations were running high that the Bank of Canada would trim its key rate again. Instead, Governor Stephen Poloz and his colleagues have kept rates at 0.5 per cent.

Here is what the Bank of Canada said about the loonie in

: "Prices of oil and other commodities have rebounded in recent weeks. In this context, and in light of shifting expectations for monetary policy in Canada and the United States, the Canadian dollar has appreciated from its recent lows."