On Wednesday, the Canadian dollar rebounded against the greenback as a pickup in U.S. consumer confidence strengthened investor sentiment. However, analysts remained cautious about Canadian currency being out of danger after dropping to a one-year low at the beginning of this week.
The loonie (Canadian coin) was trading 0.6% higher at 1.2843 to the greenback. This was (equal to 77.88 U.S. cents), after trading from 1.2839 to 1.2925. On Monday, the currency reached its weakest level since the end of 2020 at 1.2964. The director at Klarity FX in San Francisco, Amo Sahota, said that it’s a sentiment story adding that equities could not directly reverse the gains from Dec. 22.
Moreover, Wall Street forced higher for the second day in a row. This occurred after the consumer confidence uptick indicated that the economy in the U.S. would continue to expand next year.
A South African study indicating decreased risks of serious illness and hospitalization in people infected with the new Omicron strain versus the Delta variant. So, this information supported stocks.
The Canadian currency seems to be sensitive to changes in risk appetite as Canada is a significant producer of oil and other commodities.
U.S. crude oil futures fixed 2.4% higher at $72.77 a barrel. Sahota said that it is all very inconsistent. He added that it was difficult to make a serious judgment call on the price movement over the last 24 hours.
A preliminary estimate showed that the Domestic data also seemed optimistic. Factory sales increased 3.2% in November. Canada’s GDP report might offer further clues on the economy’s strength.
Canadian government bond yields dropped, tracking the movement in U.S. Treasuries. The 10-year reduced 1.8 basis points to 1.422%. It pulled back from its highest level since the end of December at 1.466% earlier in the session.