Loonie soars toward 80 cents as U.S. greenback and oil slide

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TORONTO — The Canadian dollar strengthened on Tuesday against its U.S. counterpart to a fresh 14-month high, boosted by higher oil prices, while the greenback lost ground against a basket of major currencies.

The U.S. dollar sank to a 10-month low as the latest collapse of President Donald Trump’s efforts to deliver a new healthcare bill added to worries about the pace of U.S. growth.

Prices of oil, one of Canada’s major exports, rose as demand soaked up some of the surplus supplies from Organization of the Petroleum Exporting Countries and the United States.

U.S. crude prices were up 1.69 per cent at $46.80 a barrel.

At 9:11 a.m. ET, the Canadian dollar was trading at $1.2611 to the greenback, or 79.30 U.S. cents, up 0.7 per cent.

The currency’s weakest level was $1.2702, while it touched its strongest since May 2016 at C$1.2581.

Gains for the loonie came after the Bank of Canada raised interest rates last week for the first time in seven years and signaled it will hike again over the coming months. The currency has gained nearly 7 per cent since the central bank turned hawkish in June.

The central bank’s policy rate sits at 0.75 per cent.

Canadian government bond prices were mixed across the yield curve, with the two-year down one cent to yield 1.205 per cent and the 10-year flat to yield 1.895 per cent.

The gap between the 10-year yield and its U.S. counterpart narrowed by 2.5 basis points to a spread of -38.9 basis points, its narrowest since July 5, 2016.

Lending to Canadian small businesses picked up in May on stronger activity in the agriculture and consumer sectors, data showed, suggesting companies were becoming more willing to invest two years after a slump in oil prices hit the economy.

Data on Canada’s manufacturing sales for May is due on Wednesday, while retail sales data for May and the June inflation report are due out on Friday.

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