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C$ advance falls short of 1.30 level as greenback rebounds

11/23/2020 | 03:29pm

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Monday as the latest news of progress on a COVID-19 vaccine boosted investor sentiment, but the loonie gave back much of its earlier advance as the greenback broadly rallied.

The Canadian dollar was trading 0.1% higher at 1.3085 to the greenback, or 76.42 U.S. cents. The currency, which rose 0.3% last week, traded in a range of 1.3047 to 1.3112.

"At the start of the American session it looked like USD-CAD might make another run below 1.3000," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. "But the broad USD turned higher during the American morning as gold took a tumble while equity risk appetite backed off a bit."

Gold, which is traded in U.S. dollars, fell by about 1.8% as better-than-expected U.S. business activity data indicated to some investors that less monetary policy stimulus could be needed.

There is enough support for the U.S. dollar at 1.3000 that it will likely take a confluence of factors such as rising equities and oil prices, as well as a weaker greenback for the loonie to move past that level, said Anderson, adding "I expect that over the next 2-3 weeks, but maybe not in this holiday-thinned week."

U.S. markets will be closed for the Thanksgiving holiday on Thursday.

Shares rose globally and the price of oil, one of Canada's major exports, settled 1.5% higher after AstraZeneca said its COVID-19 vaccine could be around 90% effective.

A resilient financial system and a targeted response by authorities has tempered the impact of the COVID-19 pandemic on Canada's financial system, Bank of Canada Deputy Governor Toni Gravelle said.

Canadian government bond yields were higher across a steeper curve. The 10-year yield rose 3.7 basis points to 0.686%.

(Reporting by Fergal Smith; editing by Emelia Sithole-Matarise; Editing by Nick Zieminski)

By Fergal Smith

© Reuters 2021
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