C$ strengthens as oil and stocks climb

22/09/2016 06:00 AST

The Canadian dollar strengthened against its US counterpart on Wednesday as oil rose and the Bank of Japan's decision to target the yield curve supported stocks, while investors expected the US Federal Reserve to leave interest rates on hold.

US crude prices were up 2.07 percent at $44.96 a barrel after a surprisingly large drop in US crude inventories and as an oil services workers strike in Norway threatened to cut North Sea output.

Oil is one of Canada's major exports.

The BOJ made an abrupt shift to targeting interest rates on government bonds to achieve its elusive inflation target, after years of massive money printing failed to jolt the economy out of decades-long stagnation.

The Fed policy decision is awaited later on Wednesday. Expectations of a rate increase have all but evaporated after some weak economic data.

At 9:32 a.m. EDT (1332 GMT), the Canadian dollar was trading at C$1.3188 to the greenback, or 75.83 US cents, stronger than Tuesday's close of C$1.3209, or 75.71 US cents. The currency's strongest level of the session was C$1.3139, while its weakest was C$1.3204.

Gains for the loonie came after a speech on Tuesday by Bank of Canada Governor Poloz that suggested the central bank will remain on the sidelines even as the economy struggles to gain traction.

In domestic data, the value of Canadian wholesale trade rose in July for the fourth consecutive month, posting a 0.3 percent gain on strength in the motor vehicle and parts subsector, Statistics Canada said.

Still, the Organisation for Economic Cooperation and Development has cut its 2016 growth forecast for Canada to just 1.2 percent, while it warned that global economic growth will flounder this year and next at rates not seen since the financial crisis.

Canadian government bond prices were lower across the yield curve, with the two-year bond down 2 Canadian cents to yield 0.581 percent and the benchmark 10-year falling 20 Canadian cents to yield 1.184 percent.

Canadian inflation and retail sales data are due on Friday. The annual inflation rate is forecast to have edged up to 1.4 percent in August, while investors will be looking for signs that the federal government's new child benefit payments boosted retail sales.

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