Canadian dollar notches 5-month high as exports climb

The Canadian dollar strengthened to its highest in nearly five months against its

U.S. counterpart on Tuesday, as the threat of additional sanctions on Russia boosted oil prices and data showed Canada’s exports climbing to a record high in February

The loonie was trading 0.5% higher at 1.2420 to the greenback, or 80.52 U.S. cents, after touching its strongest level since Nov. 10 at 1.2418

Gains for the Canadian dollar came as other commodity-linked currencies moved higher, including a 1.2% jump in the Australian dollar after the Reserve Bank of Australia dropped its pledge to be “patient” on hiking interest rates.

Canada’s exports rose 2.8% in February, driven mostly by energy products, while imports climbed 3.9% from the previous month. It left a slightly narrower trade surplus of C$2.7 billion

The price of oil, one of Canada’s major exports, rose 0.6% to $103.87 a barrel as the United States and Europe planned new sanctions to punish Russia over alleged war crimes in Ukraine, raising concerns over tighter global supply

Meanwhile, Canada’s Liberal party government finds itself in a bind ahead of this week’s budget: the economy has recovered from the pandemic, yet Prime Minister Justin Trudeau has pledged billions in new stimulus, a political poker chip that could further torch runaway inflation

With inflation at a 30-year high, money markets see a 70% chance that the Bank of Canada will hike interest rates by half a percentage point at a policy announcement next week

Canadian government bond yields moved higher across the curve, tracking the move in U.S. Treasuries. The 10-yearwas up 4 basis points to 2.476%