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Canadian dollar dips on lower oil prices

01/09/2017

The Canadian dollar edged lower against its U.S. counterpart on Monday, pressured lower by falling prices for oil, a major Canadian export.

USD/CAD edged up to 1.3247 and the pair’s strongest level of the session was 1.3277, while its weakest was 1.3226.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 102.23.

Demand for the greenback continued to be underpinned after Friday’s U.S. nonfarm payrolls report for December, which showed a slowdown in hiring but the fastest wage growth in over seven years, supported the case for rate hikes this year.

The Federal Reserve has indicated that three quarter-percentage-point interest rate increases are on the cards for 2017.

Higher rates boost the dollar by making the currency more attractive to yield-seeking investors.

The loonie, as Canada's currency is also known, came under pressure as oil prices were hit by concerns that an increase in U.S. production would offset an agreement between other major producers to cut output in a bid to reduce a global supply glut.

Higher prices for oil, one of Canada's major exports, typically boost the Canadian dollar.