TORONTO, Sept 24 (Reuters) - The Canadian dollar strengthened to nearly a four-week high against its U.S. counterpart on Tuesday as China's economic stimulus measures offset dovish guidance by Bank of Canada Governor Tiff Macklem on the prospects for further interest rate cuts.
The loonie was trading 0.7% higher at 1.3450 to the U.S. dollar, or 74.35 U.S. cents, after touching its strongest level since Aug. 28 at 1.3447.
"Risk appetite is rebounding across the currency markets after Chinese authorities unveiled a raft of stimulus measures designed to boost growth and reinvigorate market sentiment," Karl Schamotta, chief market strategist at Corpay, said in a note.
China is a major importer of some of the commodities that Canada produces, such as oil.
The price of oil rose on China's stimulus and concerns that conflict in the Middle East could hit regional supply while another hurricane threatened supply in the U.S.
U.S. crude oil futures were up 1.4% to $71.33 a barrel, while gains for energy and metal mining shares helped lift Canada's main stock index, the S&P/TSX Composite, to a record high.
It is reasonable to expect more interest rate cuts given the continued progress the BoC has made in bringing inflation back down to the 2% target, Macklem told a conference in Toronto, making his first remarks since data showed Canada's consumer price index hit 2% in August.
Canadian government bond yields were mixed across a steeper curve.
The 10-year rate rose 1.3 basis points to 2.963%, while it was trading 2 basis points further above the 2-year rate at a spread of 5.4 basis points, the largest positive gap since July 2022.
Reporting by Fergal Smith; Editing by Paul Simao
