The Canadian dollar firmed against the greenback on Wednesday, rising alongside a gain in oil prices and an overall improvement in risk appetite in the market. Worries over geopolitical tensions eased after leaders of the Group of Seven major industrialized nations agreed this week to hold off on sanctions targeting Russia's economy unless President Vladimir Putin takes further action to destabilize Ukraine or other former Soviet republics. The United States and European Union agreed on Wednesday, however, to work together to prepare possible tougher sanctions, a move the market took in stride.

The brightening of sentiment helped the loonie continue to consolidate after it fell to a 4-1/2 year low last week. It has risen for the past four session. The selloff was sparked by more dovish-than-expected comments from Bank of Canada Governor Stephen Poloz and concerns about the possibility of a faster timetable for raising interest rates in the United States. "Last week, any reason was good to sell the Canadian dollar," said Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York. "The reaction (to Poloz) was probably too strong, so having some type of consolidation this week would make sense." With no major economic data on the calendar until next week, analysts said the Canadian dollar is likely to be confined to a tight range. "There's no catalyst for the loonie in the near term, so we're still expecting to see a lack of momentum in the short term and a lot of range-bound trading," said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto. The Canadian dollar ended the North American session at C$1.1084 to the greenback, or 90.22 U.S. cents, firmer than Tuesday's close of C$1.1159, or 89.61 U.S. cents. Overnight, the loonie had risen alongside other growth and commodity currencies, including the Australian dollar, after Australia's top central banker played down the risk of a sustained rise in domestic inflationary pressures. Reserve Bank of Australia Governor Glenn Stevens did not make any mention in his speech of the Australian dollar being too strong, but he later said he expects the currency to weaken. A rise in oil prices helped the Canadian dollar regain momentum in the later part of Wednesday's session. U.S. crude oil futures settled up $1.07 at $100.26 a barrel. Canadian government bond prices were higher across the maturity curve, with the two-year up 1.6 Canadian cents to yield 1.060 percent. The benchmark 10-year was up 34 Canadian cents to yield 2.444 percent.
Source: Reuters

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