Canadian dollar rebounds from six-day low as Wall Street rallies

The Canadian dollar CADUSD strengthened against its U.S. counterpart on Tuesday, recovering from its lowest level in nearly one week, as gains for equity markets offset further pullback in oil prices.

The loonie was up 0.3% at 1.2785 to the greenback, or 78.22 U.S. cents, after touching its weakest intraday level since March 9 at 1.2871.

“You have so many conflicting signals for a currency like CAD between oil, equities, U.S. yields – all pulling this way and that,” said Erik Nelson, a currency strategist at Wells Fargo. “Today, it seems like equity markets are a little bit more in control.”

Wall Street’s main indexes climbed as oil prices fell and data showed a softer-than-expected rise in producer prices, with investors remaining focused on the outcome of the Federal Reserve’s two-day policy meeting.

The price of oil, one of Canada’s major exports, tumbled to its lowest levels in almost three weeks as supply disruption fears eased and surging COVID-19 cases in China spurred demand concerns.

U.S. crude prices settled 6.4% lower at $96.44 a barrel. Earlier this month, oil touched its highest since 2008 at $130.50 as Russia invaded Ukraine. Russia calls its actions in Ukraine a “special operation.”

Canadian housing starts rose 8% in February compared with the previous month, data from the national housing agency showed.

Separate data showed that Canadian home prices surged to an all-time high in February and that factory sales increased by 0.6% in January.

On a more cautious note, thousands of workers at Canada’s second-biggest railway have threatened to strike this week, potentially disrupting the movement of grain, potash and coal at a time of soaring commodity prices.

The Canadian 10-year yield touched its highest since December 2018 at 2.176% before dipping to 2.173%, up nearly one basis point on the day.

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