TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday, rebounding from a one-week low the day before, as the prospect of U.S. stimulus bolstered investor sentiment, while domestic data showed factory sales pulling back in November.
Global market indexes climbed and the U.S. dollar eased before Janet Yellen's Treasury Secretary confirmation speech, in which she is expected to bolster the case for heavy fiscal stimulus in the world's largest economy.
Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures were little changed at $52.34 a barrel as optimism that government stimulus will eventually lift global economic growth offset concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.
The Canadian dollar rose 0.2% to 1.2727 per U.S. dollar, or 78.57 U.S. cents, having traded in a range of 1.2719 to 1.2758.
On Monday, the loonie was pressured by U.S. President-elect Joe Biden's expected move to cancel the Keystone XL pipeline, touching its weakest since Jan. 11 at 1.2799.
Canadian factory sales decreased by 0.6% in November from December, the first drop in three months, on lower sales of aerospace products and parts, as well as motor vehicles and parts, Statistics Canada said. Separate data showed wholesale trade rising 0.7% in November, posting an all-time high of C$67.4 billion ($53.0 billion).
Canada's inflation report for December and a Bank of Canada interest rate decision are due on Wednesday.
Analysts see a small chance of a 'micro rate cut," with the central bank moving its benchmark rate by less than 25 basis points, avoiding negative rates. The policy rate was last cut in March to a record low of 0.25%.
Canadian government bond yields were higher across a steeper curve, with the 10-year up 1.6 basis points at 0.826%.