C$ strengthens to nearly one-week high as stocks rise

TORONTO (Reuters) - The Canadian dollar strengthened to nearly a one-week high against the greenback on Tuesday, boosted by a rise in stocks and growing expectations of a Bank of Canada interest rate hike next week.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch/File Photo

Stocks gained as upbeat earnings reports helped ease jitters over the impact of various global issues, including tariffs, on corporate profits.

Canada runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows.

Still, Canadian business optimism remained at near-record levels in the third quarter as companies reported rising pressure on capacity, labor and prices amid signs of stronger sales, the Bank of Canada said on Monday.

The central bank has raised rates four times since July 2017. Its policy rate is currently 1.50 percent.

Chances of another rate hike at the Oct. 24 announcement have climbed to more than 90 percent. They were less than 80 percent before a deal to revamp the North American Free Trade Agreement was struck at the end of September.

At 9:10 a.m. (1310 GMT), the Canadian dollar CAD=D4 was trading 0.3 percent higher at 1.2945 to the greenback, or 77.25 U.S. cents.

The Canadian currency touched its strongest level since Oct. 10 at 1.2946 even as the price of oil, one of Canada’s exports, fell and foreign investment in Canadian securities slowed.

U.S. crude CLc1 prices were down 0.6 percent at $71.36 a barrel, pressured by evidence of higher U.S. oil production and increasing U.S. crude inventories.

Foreign investors bought a net C$2.82 billion in Canadian securities in August, following a revised C$15.29 billion total purchase in July, Statistics Canada said. It was the lowest monthly investment since the beginning of the year.

Canadian government bond prices were lower across the yield curve, with the 10-year CA10YT=RR falling 6 Canadian cents to yield 2.509 percent.

Earlier this month, the 10-year yield touched its highest level in nearly five years at 2.615 percent.

Reporting by Fergal Smith; Editing by Paul Simao