The Canadian dollar gained more than a full cent today, closing at 72.61 cents US, up 1.32 cents from Thursday. It was the loonie's first finish above 72 cents US since the start of the year.

The loonie rallied after oil bounced back from a plunge on Tuesday that saw crude dip below $30 US a barrel.

On Wednesday, oil surged $2.40 US a barrel, or eight per cent, to settle at $32.28. 

In addition to the rally in oil, analysts also credited the surge in the Canadian buck to broad weakness in the U.S. dollar. The U.S. currency had its worst day in seven years against a basket of major world currencies, Bloomberg reported Wednesday. 

The U.S. dollar slumped on growing expectations that the U.S. Federal Reserve will not raise interest rates as robustly as had been anticipated just weeks ago.

According to CME FedWatch, the probability of a further Fed rate hike by December is now just 39 per cent.

"A steady stream of disappointing U.S. data this week ... coupled with a steady drumbeat of dovish banter from Fed officials ... have taken the wind out of the big dollar's sails," said BMO economist Sal Guatieri in a commentary. "Finally, some much-needed good news for Canadian snowbirds."

North American stock markets were higher on Wednesday, led by surging energy shares, with the TSX and the Dow both up by more than one per cent. 

Investors have been worried about spillover effects from the slump in oil prices as major energy companies cut jobs and investment. Falling oil prices are also an added challenge for economies that are battling deflation at a time when both China and the U.S. are showing signs of faltering growth momentum.

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With files from The Associated Press and Reuters