Canadian dollar firms on improved investor sentiment

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as investor sentiment improved and domestic data showed payrolls climbing in September.

The loonie was trading 0.2% higher at 1.2644 to the greenback, or 79.09 U.S. cents, after trading in a range of 1.2640 to 1.2677. On Tuesday, it hit its weakest intraday level in nearly eight weeks at 1.2744.

"The CAD remains at the mercy of external factors and sentiment to a large extent at the moment," strategists at Scotiabank, including Shaun Osborne, said in a note.

A tech shares bounce helped lift European equities after they hit a three-week low the day before. Investors have worried that a surge in COVID-19 cases in Europe is raising the prospect of lockdowns going into the Christmas shopping season.

The Toronto stock market also gained ground. U.S. markets were closed for Thanksgiving.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the signal that stocks send about the global economic outlook.

U.S. crude oil futures fell 0.5% to $78.03 a barrel as investors eyed how major producers respond to the U.S.-led emergency oil release designed to cool the market.

Canadian payroll employment rose by 91,100 in September, the fourth consecutive monthly increase, data from Statistics Canada showed.

Floods that wiped out bridges, roads and rail lines in British Columbia will hurt Canada's economic growth and fuel inflation in the fourth quarter, but the Bank of Canada's rate-hike timing is likely to remain unchanged, economists said.

Canadian government bond yields eased across the curve. The 10-year was down 1.4 basis points at 1.7649, after touching on Wednesday its highest intraday level since April 2019 at 1.826%.

(Reporting by Fergal Smith; Editing by Daniel Wallis and Jonathan Oatis)