The Canadian dollar CADUSD strengthened against its U.S. counterpart on Thursday, recovering from an earlier eight-day low, as signs of a soft landing for the U.S. economy bolstered investor sentiment.
The loonie was trading 0.2% higher at 1.35 to the greenback, or 74.07 U.S. cents. It was the only Group of Ten currency to post gains against the U.S. dollar.
“Markets are in a risk-on environment … that always helps the commodity currencies,” said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc.
The S&P 500, the benchmark U.S. stock index, was holding near the record closing high it posted the previous day after data showed the U.S. economy growing faster than expected in the fourth quarter and inflation pressures subsiding further.
Canada sends about 75% of its exports to the United States, including oil.
U.S. crude futures were up 2.4% at $76.86 a barrel, supported by the U.S. data and as a fresh attack by Houthi forces on ships off Yemen’s coast underscored the peril facing trade in a key global transit route.
Still, the Canadian currency touched its weakest intraday level since Jan. 17 at 1.3534. It was pressured on Wednesday by concern that a downturn in the domestic economy could deepen as the Bank of Canada left its key interest rate on hold at a 22-year high of 5% and said it was too soon to discuss cutting rates.
A preliminary estimate on Thursday showed manufacturing sales falling 0.6% in December from November.
Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries.
The 2-year was down 3.5 basis points at 4.002%, while the gap between it and the U.S. equivalent narrowed by 3.8 basis points to about 30 basis points in favor of the U.S. note.