Investing.com – The Canadian dollar strengthened to fresh seven-week highs against its U.S. counterpart on Tuesday as gains in oil prices continued to underpin the risk-sensitive, commodity-linked Canadian currency.
USD/CAD was last at 1.3110, down 0.14% for the day after touching lows of 1.3106, the weakest level since October 20.
Oil prices continued to remain supported after major oil producers reached a deal over the weekend to cut output in an attempt to curb massive oversupply and rebalance the market.
Global oil inventories could start to draw in the first half of 2017 if producers follow through on an agreement to cut output, the International Energy Agency said Tuesday.
Higher prices for oil, one of Canada’s major exports, typically boost the Canadian dollar.
Investors were also turning their attention to the outcome of the final Federal Reserve meeting of 2016 on Wednesday.
The Fed is widely expected to hike rates, with investors pricing in a 100% chance of an increase, according to federal funds futures tracked Investing.com’s Fed Rate Monitor Tool.
The Fed is also expected to announce updated economic forecasts and investors remained cautious amid doubts over whether the U.S. central bank will indicate that more monetary tightening is to follow in 2017.
Higher rates boost the dollar by making the currency more attractive to yield-seeking investors.
The dollar was little changed against a basket of six other major currencies, with the U.S. dollar index at 101.02.