Forexpros – The U.S. dollar fell to a three-week low against its Canadian counterpart in thin year-end trade on Wednesday, after an Italian bond auction showed a sharp drop in yields, while ongoing strength in crude prices provided further support.
USD/CAD hit 1.0125 during early U.S. morning trade, the pair’s lowest since December 8; the pair subsequently consolidated at 1.0140, shedding 0.46%.
The pair was likely to find support at 1.0051, the low of December 8 and resistance at 1.0176, the previous day’s high.
With most investors already away on year-end leave, trading volumes were thin, resulting in tight liquidity conditions and irregular volatility.
Italy’s Treasury sold EUR9 billion of six-month bills, at an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November. The country also sold EUR1.73 billion of two-year zero-coupons at a 5% yield.
Following the auction, the yield on Italy’s 10-year bonds traded at 6.86%, hovering below the 7% threshold widely seen as unsustainable in the long-term.
Despite the upbeat results, Thursday’s sale of EUR8.5 billion of long-term Italian debt maturing between 2014 and 2022 was seen as a bigger test of market confidence in the country’s sovereign debt.
Meanwhile, the loonie continued to draw support from ongoing strength in crude oil prices. Light, sweet crude futures for delivery in February rose to as high as USD101.67 a barrel on the New York Mercantile Exchange, the highest since December 7.
Raw materials, including oil account for about half of Canada’s export revenue.
Elsewhere, the loonie was also higher against the euro, with EUR/CAD slumping 0.6%, to hit 1.3233.
No major U.S. economic figures are set for release Wednesday, while data set for release during Thursday’s trading session include the latest estimate of weekly jobless claims, a December purchasing-managers index for the Chicago region and November home sales.
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