Canadian dollar tracks oil higher in 'choppy trading'

  • Canadian dollar strengthens 0.3% against greenback
  • Canadian factory activity expands at slower pace
  • Price of U.S. oil settles 1.2% higher
  • Canadian bond yields jump across steeper curve

TORONTO, Jan 4 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday as the price of oil, one of Canada's major exports, rose and domestic data showed further growth in factory activity.

The loonie was trading 0.3% higher at 1.2685 to the greenback, or 78.83 U.S. cents, after trading in a range of 1.2668 to 1.2765.

"I expect a little bit of choppy trading throughout January, largely following oil prices," Rahim Madhavji, president at "Once we get through the peak (of Omicron) ... I think the loonie resumes its uptrend."

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The Canadian dollar was the only G10 currency to strengthen against the greenback in 2021, posting a gain of 0.8%.

U.S. crude prices settled 1.2% higher at $77.27 a barrel as OPEC+ producers agreed to stick with their planned increase for February based on indications that the Omicron coronavirus variant would have only a mild impact on demand. read more

The IHS Markit Canada Manufacturing Purchasing Managers' Index (PMI) fell to a seasonally adjusted 56.5 in December from 57.2 in November as material shortages and delivery delays held back output.

A reading above 50 shows growth in the sector but the latest reading was the lowest since July.

Canada's jobs report for December, due on Friday, could provide further clues on the strength of the domestic economy.

Canadian government bond yields surged across a steeper curve, playing catch-up with a move in U.S. Treasuries on Monday when the Canadian market was closed for a public holiday.

The 10-year yield touched its highest level in more than one month at 1.624% before dipping slightly to 1.597%, up 16.7 basis points on the day.

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Reporting by Fergal Smith Editing by Paul Simao and Grant McCool

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