Canadian dollar pulls back from three-week high as greenback steadies

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Thursday, pulling back from its strongest level in nearly three weeks as a winning streak for oil ended and the greenback broadly steadied.

The loonie was trading nearly unchanged at 1.2698 to the greenback, or 78.75 U.S. cents, after having touched its strongest intraday level since Jan. 22 at 1.2660. The U.S. dollar was little changed against a basket of major currencies after it was pressured on Wednesday by a dovish Federal Reserve outlook.

"The market is still trying to figure out its outlook for the U.S. dollar," said Eric Theoret, global macro strategist at Manulife Investment Management.

Theoret expects the Canadian dollar to pull back to 1.30 as a faster rollout of the COVID-19 vaccine in the United States than in Canada gives the U.S. economy a head start on reopening.

The price of oil, one of Canada's major exports, fell for the first time this month after both OPEC and the International Energy Agency said renewed lockdowns and the emergence of new coronavirus variants reduced the prospect of a swift demand recovery.

U.S. crude prices settled 0.8% lower at $58.24 a barrel, while the rally on Wall Street lost some momentum after U.S. President Joe Biden said the United States must raise its game in the face of the challenge from China.

Canadian government bond yields were mixed across a steeper curve in sympathy with U.S. Treasuries, with the 10-year rising nearly 1 basis point to 0.996%. Earlier in the day, it touched its highest level since last March at 1.031%.

(Reporting by Fergal Smith; Editing by Alexandra Hudson and Peter Cooney)