Canadian dollar extends rally as investors cheer vaccine progress

(Adds strategist quotes and details throughout; updates prices)
* Canadian dollar gains 0.5% against the greenback
* Loonie touches a 2-year high at 1.2852
* Price of U.S. oil settles 0.8% higher
* Canadian bond yields trade mixed across a flatter curve

By Fergal Smith
TORONTO, Dec 3 (Reuters) - The commodity-linked Canadian
dollar strengthened to a two-year high against its U.S.
counterpart on Thursday as investors bet that the rollout of
COVID-19 vaccines would boost economic recovery.
"The Canadian dollar has been etching out fresh highs each
day this week as markets front-run their expectations of the
economic recovery accelerating in 2021," said Simon Harvey, FX
market analyst for Monex Europe and Monex Canada.
Vaccine headlines are driving investor optimism, Harvey
said.
Canadian health authorities could approve Pfizer Inc's
coronavirus vaccine within the next week, allowing
distribution to start in early 2021, medical officials
indicated. [​nL1N2IJ1WB]
World equity benchmarks rose and the price of oil,
one of Canada's major exports, settled 0.8% higher at $45.64 a
barrel. Sources said OPEC and Russia agreed to a modest output
increase from January of 500,000 barrels per day.
The Canadian dollar was trading 0.5% higher at 1.2858
to the greenback, or 77.77 U.S. cents. The currency touched its
strongest intraday level since October 2018 at 1.2852.
The U.S. dollar plunged to its weakest level in more
than 2-1/2 years. In addition to optimism about vaccines, signs
of progress toward U.S. fiscal stimulus kept investors upbeat,
weighing on the safe-haven U.S. currency.
Canada's jobs report for November is due on Friday, which
could help guide expectations for the Bank of Canada policy
outlook. The central bank, which has cut its benchmark interest
rate to a record low of 0.25%, is due to make a policy decision
next week.
The jobs data could show deterioration in the near-term
outlook for Canada's economy, Harvey said. Canada is in the
second wave of the pandemic, which has led to restrictions on
businesses.
Canadian government bond yields were mixed across a flatter
curve, with the 10-year down 1.3 basis points at
0.747%. On Wednesday, it touched a near three-week high intraday
at 0.780%.

(Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
Cooney)


First Published: 2020-12-03 16:27:48
Updated 2020-12-03 22:27:03


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