By Fergal Smith
TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday as investors grew less concerned about the economic threat of the Omicron coronavirus variant and data showed Canada posting its widest trade surplus so far in 2021.
Waning Omicron variant worries and a timely booster shot of Chinese stimulus lifted world stock markets and the price of oil, one of Canada's major exports.
U.S. cruse oil futures rose 2.9% to $71.48 a barrel, while the Canadian dollar was trading 0.7% higher at 1.2670 to the greenback, or 78.93 U.S. cents, after touching its strongest intraday level since Nov. 26 at 1.2665.
Canada posted a trade surplus of C$2.1 billion in October, with imports and exports both hitting record levels on higher trade in motor vehicles, Statistics Canada said.
"The devastating floods in B.C. will likely weigh heavily on November trade and activity, but this report adds to the evidence that the economy had strong momentum to start Q4," Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets, said in a note.
Data last week showed that Canada added many more jobs than expected in November and the economy grew faster than expected in the third quarter.
The Bank of Canada is due to make an interest rate announcement on Wednesday. In October, the central bank signaled it could begin raising interest rates from the current level of 0.25% in April.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries.
The 10-year rate rose 2.9 basis points to 1.552%, extending its rebound from the lowest level in more than two-months on Friday at 1.425%.
(Reporting by Fergal Smith; Editing by Alistair Bell)