TORONTO, Nov 26 (Reuters) - The Canadian dollar strengthened to a near one-week high against its U.S. counterpart on Wednesday as increased bets on a Federal Reserve interest rate cut next month helped lift equity markets and weighed on the greenback.
The loonie was trading 0.3% higher at 1.4048 per U.S. dollar, or 71.18 U.S. cents, its strongest intraday level since November 20.
"The move lower in USD-CAD has generally been a function of broader USD weakness after softer U.S. retail sales and consumer confidence data yesterday," said George Davis, chief technical strategist at RBC Capital Markets.
"This caused the market to price in the increased probability of a December rate cut from the Fed, thereby weakening the USD."
The U.S. dollar (.DXY), touched a one-week low against a basket of major currencies and Wall Street's main indexes rose for a fourth consecutive session.
"This week’s rebound in equities has also lent some support to CAD via an improvement in risk sentiment," Davis said.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the signal that stocks send about the economic outlook.
U.S. crude oil futures were trading 0.6% higher at $58.29 a barrel, clawing back some recent declines.
Canadian GDP data, due on Friday, could help guide expectations for additional Bank of Canada interest rate cuts.
Analysts forecast the economy grew at an annualized rate of 0.5% in the third quarter, which would be an outcome that narrowly avoids a second-straight quarterly contraction.
Canada's main stock index is expected to rise to another all-time high next year as trade uncertainty potentially eases and resource shares benefit from booming spending on artificial intelligence, a Reuters poll found.
Canadian bond yields were mixed across the curve. The 10-year eased 1.5 basis points to 3.135%, approaching the near two-week low it hit on Tuesday at 3.130%.
Reporting by Fergal Smith; Editing by Chris Reese
