TORONTO – Strengthening oil prices and a weak U.S. dollar helped lift the loonie for the fourth straight day Wednesday as traders shied away from major movements in North American stock markets ahead of a meeting next week of the U.S. Federal Reserve.
The Canadian dollar gained nearly half a cent, adding 0.46 of a U.S. cent to 78.76 cents US.
The currency is being supported by rising oil prices, which saw the July crude contract climb 87 cents to settle at US$51.23, the highest close since last July.
John Stephenson, president and CEO of Stephenson & Co. Capital Management, said oil prices in the short term have been helped by declining production in the U.S., Canada and Nigeria.
But because these factors are temporary, he doesn’t believe crude prices have much more room to grow.
“My sense is that oil will have trouble breaking beyond these levels,” said Stephenson.
Gold continued to be a bright spot. The August bullion contract rose $15.30 to US$1,262.30 an ounce as traders took advantage of a low U.S. dollar and signs that the Fed is not likely to raise interest rates this month.
The Fed raised its key policy rate for the first time in nearly a decade in December and had hinted that there were several more hikes in store before the end of this year. Many traders had expected the U.S. central bank to raise rates as early as June, but now many are predicting that to happen in July or even September.
Those expectations have been tempered recently following the U.S. jobs report last Friday, which noted surprisingly weak growth in May.
Fed chair Janet Yellen has repeatedly said that the bank will continue to take a slow and steady approach when it comes to rate hikes if economic conditions are strong enough to support such a move.
The Fed is set to hold its policy meeting from next Tuesday to Wednesday.
On Wall Street, the Dow Jones industrial average jumped 66.77 points at 18,005.05, the broader S&P 500 composite index advanced 6.99 points to 2,119.12 and the Nasdaq composite gained 12.89 points to 4,974.64.
In Toronto, the S&P/TSX composite index fell 52.51 points to 14,313.10 due to pressure from energy, health care and telecom stocks.
“We’re in a bit of a lull because earnings season is over for now,” said Stephenson, adding that traders will soon rely on currencies and commodities for direction.
The July natural gas contract was unchanged at US$2.47 per mmBTU, while July copper contracts rose a penny to US$2.06 a pound.
Follow @LindaNguyenTO on Twitter.