TORONTO – The Canadian dollar continued to ride higher with oil prices Tuesday, as both the currency and a barrel of crude climbed in value for a fourth straight day.
The loonie added 0.38 of a cent to 77.80 cents U.S., closing at its highest level in more than a month amid a weakening U.S. dollar. The loonie hasn’t closed above 78 cents US since June 23.
The currency found support from oil prices, as the September crude contract added 84 cents at US$46.58 per barrel amid growing hopes that OPEC will reach an output deal when the group meets next month.
Oil prices have been lifted in recent days after it was reported that Saudi Arabia may be willing to curb production with other OPEC nations to put a floor under prices. These rumours were helped after Russia said it would work with Saudi Arabia, the world’s largest oil exporter, to help achieve market stability.
“There is some discussion that the Saudis are willing to talk about restraining production and getting some of the supply overhang off the market faster than expected,” said Roland Chalupka, chief investment officer at Fiduciary Trust Canada.
He also noted that U.S. rig counts are also in decline, which has been helping crude prices.
Meanwhile, North American equity markets ended in the red with Toronto’s S&P/TSX composite index losing 73.58 points at 14,703.44, weighed down by gold and materials stocks.
In New York, the three major indices retreated from the all-time record closes seen on Monday.
The Dow Jones industrial average dropped 84.03 points to 18,552.02, the S&P 500 slipped 12 points to 2,178.15 and the tech-heavy Nasdaq composite snapped three days of record closes and declined 34.91 points to 5,227.11.
Much of the retreat was blamed on hawkish comments coming out of the U.S. Federal Reserve, which hinted that a rate hike might come sooner than expected.
On Tuesday, New York Fed president William Dudley told Fox Business Network that it’s “possible” for the central bank to rate raise at its September policy meeting if the data supports such a move.
Most economists believe the earliest a hike may come would be in December, after the U.S. presidential election or in the new year.
But Chalupka said Dudley’s comments were meant as a reminder to stock markets that the bank’s accommodative policies will not last forever.
“It’s a balancing act. They have to temper their dovish comments and support for the markets with some hawkish comments so they’re not seen as being so far behind the curve, if inflation does rear its head,” he said.
The Fed is set to release the minutes of its July meeting on Wednesday.
In commodities, the September natural gas advanced three cents to US$2.62 per mmBTU, September copper was ahead two cents at US$2.17 per pound and December gold contracts rose $9.40 to US$1,356.90.
Follow @LindaNguyenTO on Twitter.