Canadian dollar continues rally to top 78 cents US
Price for oil rises more than four per cent
Propelled by a big jump in the price for oil, Canada's dollar on Tuesday rose back up to levels not seen in nine months.
The loonie added 0.85 of a cent to close at 78.33 cents US, its highest finish since July 14 of last year, according to the Bank of Canada.
Tuesday's rise added on to Monday's gain of 0.6 of a cent, which drove the loonie through 77 cents.
The loonie has been on the rise since it bottomed out at 68 cents US in January.
Contributing to the flight of the loonie has been a rebound in the price of oil. The price for the May contract for West Texas Intermediate crude oil closed up $1.81 US, or more than four per cent, to $42.17 US per barrel, the highest finish this year and the best since November.
Oil's jump on Tuesday came after Russia's Interfax news agency reported that Russia and Saudi Arabia had reached agreement on an output freeze before a meeting of OPEC members and some outside petroleum producing countries in Doha, Qatar, on Sunday.
Oil has regained ground since it touched its recent low on Feb. 11 at $26.21 US a barrel.
Interest rate watch
Despite the recent oil-fuelled run-up by the Canadian dollar, the longer term expectations among those who track the loonie are not as positive.
According to a Bloomberg survey of currency watchers, the median estimate calls for an exchange rate of $1.33 Canadian per U.S. dollar by the middle of the year. On Tuesday, one U.S. dollar was trading just above $1.28 Cdn.
Some recent good domestic economic news means the Bank of Canada is expected to remain on a cautious footing on Wednesday when it makes an interest rate announcement and releases its latest monetary policy report.
"Acknowledging the Canadian economy's resilience ... but not ringing the all clear in such fashion as to light up the currency even further and put upward pressure on market rates would likely be a prudent approach," Scotiabank economists Derek Holt and Dov Zigler said in a commentary.
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Meanwhile, the U.S. Federal Reserve is expected to raise interest rates, which could attract investors to the U.S. dollar.
"As we expect the U.S. economy to be healthy enough to warrant two hikes by the Fed this year ... while oil prices should recede slightly in Q2, we expect the [Canadian dollar] to depreciate against [the U.S. dollar] on a three-month horizon," said Thomas Julien and Yuze Yuan, economists with financial services company Natixis, in a commentary.
TSX up sharply
Equity markets also enjoyed a strong session on Tuesday.
In Toronto, the S&P/TSX composite index finished with a gain of 158.66 points to close at 13,581.42.
Seven of the 13 subgroups closed lower, led by health care at 92.17 points, down 1.36 points, or 1.45 per cent. Metals and mining led the advancers, adding 28.27 points, or 6.65 per cent, to 453.52 points.
BMO senior economist Robert Kavcic said it has not just been energy stocks rallying to help the TSX rise almost 15 per cent since hitting its recent low in mid-January.
"True, the energy sector has rebounded nearly 30 per cent since then, but industrials, financials and utilities have posted double-digit gains as well," he said in a commentary.
On U.S. markets, the Dow Jones industrial average rose 164 points, or 0.9 per cent, to 17,721. The S&P 500 index gained 19 points, or one per cent, to 2,061. The Nasdaq composite added 38 points, or 0.8 per cent, to 4,872.
with files from The Canadian Press