Canadian Dollar in Longest Rally Since February on Oil, Gold

(Bloomberg) -- The Canadian dollar posted its longest rally since February as commodities bounced on expectations central banks will keep the stimulus flowing following Britain's Brexit vote.

The loonie, as the currency is nicknamed, rose for a fifth day as crude oil traded around $50 a barrel in London and precious metals advanced. Silver rose above $21 an ounce for the first time in two years amid speculation central banks in Europe and Japan would keep the monetary-policy spigots open and the U.S. would be in no hurry to raise interest rates. U.S. markets were closed for the Independence Day holiday.

"We're dealing with slightly thinner liquidity than usual given American markets are closed, but we do have reason to believe last week's rally in risk is extending into this week," Bipan Rai, senior foreign exchange and macro strategist at Canadian Imperial of Commerce, said by phone from Toronto. "Still, this is a temporary reprieve from the longer-term theme of investor anxiety following Brexit."

The Canadian dollar rose 0.5 percent to trade at C$1.285 per U.S. dollar in Toronto at close and has gained 1.4 percent since June 28. 

The currency strengthened even as a report showed slower expansion in the manufacturing sector in June and a central bank survey found fewer Canadian businesses predict faster sales growth over the next 12 months. Economic data on international merchandise trade and Canadian and U.S. labor markets are scheduled to be released later this week.

"It will be interesting to see what they show, especially non-farm payrolls, but there's nothing really other than headlines we're watching for that could put an end to this short-term rally," said Rai. "We could see an extension of this rally into the next couple of sessions."

Hedge funds and other large speculators raised their net bullish position on the Canadian dollar to 7,949 contracts as of June 28, according to data from the Commodity Futures Trading Commission. The Canadian dollar will weaken to C$1.32 by the end of the year, according to a median of 49 forecasts compiled by Bloomberg.

(An earlier version of this story corrected the strategist's title in the third paragraph.)

To contact the reporter on this story: Michael Yang in Toronto at myang190@bloomberg.net. To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Jacqueline Thorpe