Canada's loonie gains as oil prices rise

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Canada's loonie gains as oil prices rise

Toronto, Sept. 20 Reuters - The Canadian dollar strengthened against its U.S. counterpart in Asian trading on Tuesday as oil prices rose and a projected election win for Prime Minister Justin Trudeau’s Liberal party reassured investors that economic support would continue.

Trudeau's Liberals were on track to win the Canadian election, the CBC and CTV television networks projected as results filled in, but they looked set to fall short of their goal of a majority win.

This looks like a decisive win for the Liberals that allows essentially to preserve the status quo and ensures that fiscal spending plans which have supported the economy for the last year and half are likely to continue, said Karl Schamotta, chief market strategist at Cambridge Global Payments.

Foreign investors had worried that the election could result in a deadlock which would hamper Ottawa's response to the COVID - 19 pandemic and further slow the economic recovery from the crisis.

The more supportive fiscal policy is, the more likely the Bank of Canada is able to move from tapering rate hikes to rate increases in the next year and a half, said Schamotta.

The Liberals have pledged a substantial C $78 billion in new spending over five years.

The Canadian dollar was trading 0.3% higher at 1.2785 to the dollar, or 78.22 U.S. cents, after trading in a range of 1,2779 to 1.2830.

On Monday, the loonie hit its weakest intraday level in one month at 1.2895 as concerns at international property group China Evergrande roiled global financial markets.

The loonie's gains on Tuesday came as markets showed signs of calming and as oil rebounded, one of Canada's major exports. U.S. crude oil futures were up almost 1% at 70.98 a barrel.