The Canadian dollar rose to the highest level in two months against its U.S. counterpart on Thursday as uncertainty over how much the Federal Reserve will be able to raise interest rates this year pressured the greenback lower.
The U.S. dollar fell sharply on Wednesday after weak U.S. service sector data and dovish Fed comments prompted investors to trim back expectations on the timing of further rate hikes.
The Institute of Supply Management reported that activity in the U.S. services sector slowed to a near two-year low in January.
New York Fed President William Dudley said the weakening outlook for the global economy and any further strengthening of the dollar could have “significant consequences” for the health of the U.S. economy.
Investors were looking ahead to Friday’s U.S. nonfarm payrolls report for January for fresh indications on the strength of the labor market.
Data on Thursday showed that initial jobless claims rose by a larger-than-forecast 8,000 to 285,000 last week, but remained in territory usually associated with a firming labor market.
The commodity-sensitive Canadian dollar remained supported despite a pullback in oil prices from early highs.
Oil prices failed to build on the previous session’s strong gains amid persistent concerns about oversupply and fading hopes for a deal between major producers to cut output.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.83% to 96.44, the lowest level since October 23