Canadian dollar climbs to 2-month high as oil prices jump

·2 min read
FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened to its highest level in nearly two months against its U.S. counterpart on Tuesday as oil prices rose and testimony by Federal Reserve Chair Jerome Powell brought some relief to financial markets.

The loonie was trading 0.8% higher at 1.2575 to the greenback, or 79.52 U.S. cents, after touching its strongest level since Nov. 17 at 1.2567.

Comments by Powell "caused the CAD to take off," said Tony Valente, senior FX dealer at AscendantFX.

Wall Street rallied as investors appeared relieved that Powell's testimony to Congress did not include any major surprises. The prospect of faster-than-expected Fed tightening has weighed on stocks over the past week.

The price of oil, one of Canada's major exports, was supported by tight supply and hopes that the spread of the Omicron variant of the coronavirus will not derail a global demand recovery. U.S. crude oil futures settled 3.8% higher at $81.22 a barrel.

Among G10 currencies, only the Norwegian crown, which is also sensitive to oil prices, notched a bigger gain than the Canadian dollar.

The loonie broke the neckline of a head-and-shoulders trend reversal pattern at about 1.2600. That could be a bullish signal for the currency.

It should "clear the way to at least 1.23," Valente said.

Quebec, Canada's second-most populous province, is working on a plan to require a "health contribution" from adults who refuse to get a COVID-19 vaccination for non-medical reasons, Premier Francois Legault said.

Provinces across Canada are tackling an exponential rise in COVID-19 cases that has forced tens of thousands of people into isolation and burdened the healthcare sector.

Canadian government bond yields were mixed across the curve. The 10-year eased half a basis point to 1.712%, after touching on Monday its highest intraday level since Nov. 26 at 1.753%.

(Reporting by Fergal Smith; Editing by Kirsten Donovan and Paul Simao)

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