Canadian dollar falls but oil rally caps currency's decline

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Thursday as the greenback broadly advanced, but the loonie's decline slowed on stronger oil prices and ahead of Canada's monthly jobs report on Friday.

The currency was trading 0.4% lower at 1.2826 to the greenback, or 77.97 U.S. cents, having traded in a range of 1.2777 to 1.2845.

"Broad USD strength" has weighed on the loonie, said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. "But the Canadian dollar is hanging in there because of oil's rebound this afternoon."

The U.S. dollar climbed against a basket of major currencies for a fifth straight session on confidence in the U.S. economic outlook and the possibility that Friday's U.S. jobs report for January will be stronger than expected.

Canada's January employment report is also due on Friday, with economists expecting a second straight month of job declines after some provinces implemented lockdowns to help contain the coronavirus pandemic.

U.S. crude oil futures settled nearly 1% higher at$56.23 a barrel after the OPEC+ alliance of producers stuck to its reduced output policy and U.S. crude stocks fell.

Oil is one of Canada's major exports, about 75% of which goes to the United States.

Canada and the United States can collaborate more closely on manufacturing electric vehicles and on supplying critical minerals needed to make batteries for cars and other clean technologies, Prime Minister Justin Trudeau said.

Canadian government bond yields edged higher across a steeper curve, with the 10-year up 1.7 basis points at 0.966%. It touched its highest intraday since March last year at 0.975%.

(Reporting by Fergal Smith; Editing by Kirsten Donovan and Sam Holmes)