Canadian dollar advances as investors favor goods exporters

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto
Fergal Smith

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar climbed to a near three-year high against its U.S. counterpart on Thursday, bolstered by higher oil prices and the strengthening of currencies that benefit from rising demand for goods exports.

The loonie was trading 0.4% higher at 1.2638 to the greenback, or 79.13 U.S. cents. It touched its strongest since April 2018 at 1.2625.

Export-oriented economies, such as those in Asia, "that are goods-intensive have tended to see their currencies outperform," said Mazen Issa, a senior FX strategist at TD Securities. "CAD is getting pulled along for the ride."

Analysts expect vaccine rollouts and a rebound in exports to lead the recovery for trade-reliant Asian economies in 2021. On Wednesday, the Taiwan dollar notched a 23-1/2-year high at 27.938.

Data on Thursday showed Chinese exports growing more than expected in December.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global economic outlook.

U.S. crude oil futures settled 1.3% higher at $53.57 a barrel, as bullish signals from Chinese import data offset surging coronavirus cases in Europe and new lockdowns in China.

Wall Street closed lower as hopes for fresh fiscal stimulus ahead of U.S. President-elect Joe Biden's pandemic aid proposal were pitted against a weakening labor market.

Canadian home sales data for December is due on Friday, while the Bank of Canada is due to make an interest rate decision next week.

Canadian government bond yields rose across a steeper curve in sympathy with U.S. Treasuries. The 10-year was up 4.8 basis points at 0.857%, having touched on Tuesday its highest in nearly 10 months at 0.887%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)