By Ketki Saxena
Investing.com – The Canadian dollar rallied against its US counterpart today, supported by a rebound in risk-on sentiment that reflected in equities, and as treasury yields pared back. The risk-sensitive Canadian dollar meanwhile was boosted by investor sentiment even as crude prices weakened - although prices had trimmed some losses ahead of the close.
The US dollar weakened against most major currencies today, with the Dollar index maintaining its decline below the 104.00 level. The dollar weakened following negative economic data that raised investor hopes for the Fed to pare back on its hawkishness in the new year.
US initial Jobless Claims increased by 9.000 amounting to 225,000 in the week of December 24, according to data released by the US Department of Labor.
The Canadian dollar, along with commodities, received a boost from the declining risk-aversion, although the prospect for oil remains uncertain on mixed signals related to China’s Covid-19 lockdowns and cases. While the rescinding of lockdowns is expected to restore crude demand in China, rising Covid-19 cases - and the worry of further contagion to Europe put a damper on sentiment.
Looking ahead, analysts expect the USD/CAD to extend its decline, although some analysts note that thin holiday trading volumes are amplifying the affect of economic data, such as today’s US jobs numbers.
Steve Englander, head of G10 FX research at Standard Chartered (LON:STAN) writes "It's the end of the year and there are liquidity issues and so on, so the market may be reacting more to incoming data than it would under normal liquidity circumstances”.