Loonie goes above 79.50 cents US to hit 9-month high

The Canadian dollar hit a new nine-month high this morning, buoyed by oil prices that touched their highest level since November.

The loonie was changing hands at 79.50 cents US at one point Wednesday morning, it's highest mark since July 2015. 

Canada's currency was pushed up by continuing strength in crude oil prices. The price of a barrel of the North American oil benchmark known as West Texas Intermediate was up by $1.06 US on Wednesday, at $45.10.

The loonie is benefiting from crude`s rally, but also a sense that it had been sold off overly heavily earlier in the year.

"Sentiment and oil are key to the Canadian dollar's near term path," Scotiabank said in a note to foreign exchange clients early Wednesday.

WTI touches $45

Oil is up as a narrative that the market is slowly rebalancing itself is starting to take shape.

Oil in storage is inching lower, as is the number of rigs in operation. The market will get its latest glimpse at how active drillers are with the Baker Hughes rig count set to come out later in the day. Last week's figure had already fallen to its lowest level in almost six years.

But some experts caution that the oil rally may be short-lived.

"The concern is that at $45 [a barrel] a significant amount of oil plays become profitable again and we still have not seen a big enough decline in oil output to bring about the appropriate supply and demand rebalancing," said Angus Nicholson of IG.

Everyone in the market is concerned that we could see a repeat of 2015, where after a dramatic price decline, prices began to rise again and prompted a huge influx of oversupply and an even more severe sell-off."

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