Canadian dollar recovers from six-day low as Wall Street rallies
By Fergal Smith
TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Wednesday, recovering from its lowest level in nearly a week, as equity markets rallied after the U.S. Federal Reserve released minutes of its latest policy meeting.
The loonie was trading 0.1% higher at 1.2805 to the greenback, or 78.09 U.S. cents, after touching its weakest intraday level since last Thursday at 1.2884.
"The bulk of the Canadian dollar rally has come from the equity market reaction post-FOMC minutes," said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
Wall Street rose after the Fed minutes showed policymakers were unanimous in their sentiment that the U.S. economy was very strong as they grappled with how to rein in inflation without triggering a recession.
"As soon we see some dovish tilt out of the Fed we could see (interest) rates fall and stocks rally," Bregar added.
Canada is a major producer of commodities, including oil. So the loonie tends to be sensitive to the signal that stocks send about the economic outlook.
U.S. crude oil futures settled 0.5% higher at $110.33 a barrel, buoyed by tight supplies, while the U.S. dollar snapped a two-day losing streak against a basket of major currencies.
Meanwhile, the Biden administration said it was requesting that a second dispute settlement panel under the U.S.-Mexico-Canada Agreement (USMCA) be formed to review a trade dispute with Canada over dairy import quotas.
Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year touched its lowest since April 27 at 2.743% before recovering to 2.769%, down 4.1 basis points on the day.
(Reporting by Fergal Smith; editing by Jonathan Oatis and David Gregorio)
