Canadian dollar pulls back from 8-month high as greenback rallies

(Adds strategist quotes and details throughout; updates prices)

* Canadian dollar falls 0.2% against the greenback

* Loonie touches its strongest level since Jan. 8 at 1.2994

* Price of U.S. oil settles 0.4% higher

* Canadian bond yields ease across much of a flatter curve

By Fergal Smith

TORONTO, Sept 1 (Reuters) – The Canadian dollar fell against
its U.S. counterpart on Tuesday as the recent sell-off in the
greenback lost some momentum, with the loonie retreating from
its strongest level in nearly eight months despite domestic data
that showed factory sector growth.

The loonie was trading 0.2% lower at 1.3071 to the
greenback, or 76.51 U.S. cents. Earlier in the day, the
currency, which climbed 2.8% in August, touched its strongest
level since Jan. 8 at 1.2994.

“It seems consistent with the movement in the U.S. dollar
generally,” said Mark Chandler, head of Canadian fixed income
and currency strategy at RBC Capital Markets. “We’ve seen other
currencies do the same. That is, weaken a little bit after they
hit key levels.

The euro turned lower against the U.S. dollar,
pulling back after it broke through the $1.20 mark for the first
time since 2018. Investors have been betting that a move by the
Federal Reserve to a policy of average inflation targeting would
lead to interest rates staying lower for longer.

The price of oil, one of Canada’s major exports, rose as
better-than-expected U.S. manufacturing activity data spurred
hope for a post-pandemic economic recovery. U.S. crude oil
futures settled 0.4% higher at $42.76 a barrel.

Canadian manufacturing activity accelerated in August to its
fastest pace in two years, adding to evidence of a rapid rebound
in the domestic economy as businesses reopen following
coronavirus-related disruptions, data showed.

Further clues as to the strength of economic recovery could
come from Canada’s jobs report for August, which is due on

Canadian government bond yields eased across much of a
flatter curve on Tuesday, with the 10-year down 3.7
basis points at 0.587%. Last Friday, the 10-year yield touched
its highest intraday level in nearly three months at 0.697%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)
(([email protected]; +1 416 941 8113;))


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