A day after it closed above 77 cents US for the first time in almost half a year, the Canadian dollar continued making gains on Tuesday.
At noon ET on foreign exchange markets, the loonie was trading at 78.13 cents US, up 0.6 of a cent from Monday's finish, according to the Bank of Canada.
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 was up $1.52 US, or almost four per cent, at $41.88 US per barrel.
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 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.
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.
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