The Canadian dollar edged higher against its U.S. counterpart on Wednesday as oil, one of Canada's major exports, rallied and ahead of a Bank of Canada policy meeting next week that could see the central bank cut its bond purchases. "It looks like we are getting the benefit of a weakening U.S. dollar and a strengthening oil price," said Colin Cieszynski, chief market strategist at SIA Wealth Management. The U.S. dollar lost ground against a basket of major currencies, while oil surged after a report from the International Energy Agency, followed by U.S. inventory data boosted optimism about returning demand.
The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil rose and the greenback broadly declined, with the loonie rebounding from an earlier six-day low. The U.S. dollar fell against a basket of major currencies after data showed inflation making strong gains in March, though the rise was not expected to alter the Federal Reserve's commitment to keeping interest rates at rock-bottom levels for years to come. "It is more about greenback weakness as opposed to loonie strength," said Erik Nelson, a currency strategist at Wells Fargo.
USD/CAD gained downside momentum after an unsuccessful test of the resistance at 1.2625.