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Canadian dollar recovers from four-week low, helped by month-end flowsFriday, September 29, 2017 > 11:54:46
The Canadian dollar rose on Thursday against its U.S. counterpart, recovering from a four-week low, boosted by rebalancing of investors' portfolios near the end of the month.
The loonie had plunged the day before by the most since January after Bank of Canada Governor Stephen Poloz dampened expectations for further interest rate hikes this year.
"A lot of clients were looking for a pullback in the Canadian dollar to initiate hedges," said Blake Jespersen, managing director, foreign exchange sales at BMO Capital Markets.
"Portfolio rebalancing at month-end" added to support for the currency, Jespersen said.
The loonie posted a more than 2-year high earlier in September after the Bank of Canada hiked rates for the second time in three months. The bank's policy rate sits at 1 per cent.
At 5 p.m. EDT (2100 GMT), the Canadian dollar was trading at $1.2428 to the greenback, or 80.46 U.S. cents, up 0.4 per cent.
The currency's strongest level of the session was $1.2418, while it touched its weakest since Aug. 31 at $1.2519.
The recovery for the loonie came even as oil gave up earlier gains. U.S. crude oil prices settled 58 cents lower at $51.56 a barrel.
Oil is one of Canada's major exports.
The ongoing renegotiation of the North American Free Trade Agreement is a major source of economic uncertainty for Canada, which would face a shock if the pact were to be ripped up, Bank of Canada Governor Stephen Poloz said in a newspaper interview.
Canadian average weekly earnings of nonfarm payroll employees rose at an annual rate of 1.8 per cent in July, data from Statistics Canada showed.
Data on Friday is expected to show that the economy grew by 0.1 per cent for the same month, which would be consistent with moderation in the pace of growth after it accelerated in the first half of the year.
Canadian government bond prices were higher across much of a steeper yield curve, with the two-year price up 8 Canadian cents to yield 1.542 per cent and the 10-year rising 4 Canadian cents to yield 2.13 per cent.
The gap between Canada's two-year yield and its U.S. equivalent narrowed by 1.4 basis points to +8.7 basis points. Earlier this month the spread reached its widest since January 2015 at 24.8 basis points.