Canadian dollar recovers from two week low as Wall Street rallies

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

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday, with the currency rebounding from an earlier two-week low as a rally on Wall Street overshadowed domestic data showing a deeper-than-expected plunge in April factory sales.

The loonie was trading 0.2% higher at 1.3557 to the greenback, or 73.76 U.S. cents. The currency, which fell 1.2% last week, touched its weakest intraday level since June 1 at 1.3685.

“I think the loonie has just been following the overall sentiment in the markets,” said Hendrix Vachon, a senior economist at Desjardins.

Wall Street jumped following an announcement by the U.S. Federal Reserve regarding its corporate bond purchasing program that boosted investor confidence, which had been wavering amid a spike in new COVID-19 cases.

The price of oil, one of Canada’s major exports, rose as signs fuel demand was recovering and that OPEC+ members were complying with a production cut deal outweighed fears that new coronavirus infections could further slow the global economy. U.S. crude oil futures settled 2.4% higher at $37.12 a barrel.

Canadian factory sales fell by 28.5% in April from March on a record decrease in motor vehicle assembly, as well as a decline in petroleum and coal products, Statistics Canada said. Analysts had forecast a 20% decrease in the value of shipments.

Separate data, from the Canadian Real Estate Association, showed that Canadian home sales rebounded by a record 56.9% month-over-month in May, when lockdowns to help contain the coronavirus pandemic eased, after plunging in April.

Canadian government bond yields were mixed across a flatter curve, with the 10-year down 1.8 basis points at 0.516%. The 10-year yield touched its lowest intraday since May 15 at 0.468%.

Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney