Canadian dollar posts 6-day high as equities advance

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened to its highest level in nearly one week against the greenback on Wednesday, as Wall Street shook off a decline in U.S. private payrolls and the Bank of Canada reiterated that interest rates are heading higher.

The loonie was trading 0.2% higher at 1.2655 to the greenback, or 79.02 U.S. cents, after touching its strongest intraday level since last Thursday at 1.2651.

The move higher in equities helped the loonie, said Erik Bregar, CEO of Bregar Capital Corp and author of The FX Beat.

"We've seen a nice little short-term bottoming pattern in the Canadian dollar early this week," Bregar added.

Wall Street remained on course to extend gains to a fourth straight session after a turbulent start to the year, despite data showing private payrolls fell by 301,000 last month.

Last Friday, the loonie touched its weakest level in more than three weeks at 1.2796.

Bank of Canada Governor Tiff Macklem told the Senate banking committee that there was some uncertainty about how quickly inflation would drop and that interest rates would have to move higher, repeating the message from last week's policy announcement.

Money markets expect the first hike in March and at least five in total this year.

Canada's jobs report for January, due on Friday, could provide further clues on the interest rate outlook.

The price of oil, one of Canada's major exports, held near a seven-year high after OPEC+ stuck to planned moderate output increases despite pressure from top consumers to raise output more quickly.

U.S. crude oil futures settled six cents higher at $88.26 a barrel.

Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year eased 3.7 basis points to 1.755%.

(Reporting by Fergal Smith, Editing by Nick Zieminski and Sandra Maler)