By Fergal Smith
TORONTO, April 3 (Reuters) – The Canadian dollar strengthened to nearly a seven-week high against its U.S. counterpart on Monday, as oil prices surged and a Bank of Canada survey showed that fewer firms expect a recession than was previously the case.
The price of oil, one of Canada’s major exports, settled 6.3% higher at $84.93 a barrel as the Organization of the Petroleum Exporting Countries and allies, or OPEC+, jolted markets with plans to cut more production.
“As soon as people saw that OPEC story last night, the two currencies they bought out of the door were Norway and Canada,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
Both Canada and Norway are major oil producers.
The Canadian dollar was trading 0.8% higher at 1.3412 per greenback, or 74.56 U.S. cents, its biggest single-day advance since Feb. 10 and its strongest level since Feb. 16.
Adding to support for the loonie, the Bank of Canada no longer looks like an “outlier” after it paused its interest rate hiking campaign in March, Chandler said.
Investors have been dialing back bets for additional tightening from some other central banks, including the Federal Reserve after global banking sector stress emerged last month.
About half of Canadian businesses see a mild recession over the next year, the BoC said in a first-quarter survey, fewer than in the fourth quarter, and most are bracing for inflation to stay above 2% until at least 2025.
Separate data showed that Canadian manufacturing activity contracted in March.
Canadian government bond yields eased across the curve, tracking the move in U.S. Treasuries.
The 10-year CA10YT=RR was down 1.5 basis points at 2.884%, while the gap between it and its U.S. equivalent narrowed by four basis points to 55.1 basis points in favor of the U.S. bond.
(Reporting by Fergal Smith; Editing by Paul Simao)
((fergal.smith@thomsonreuters.com; +1 647 480 7446;))
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