The Canadian dollar strengthened to its highest level in more than two weeks against its US counterpart on Friday as Chinese authorities moved to cushion the impact of an economic slowdown, with the currency on track to snap a weekly losing streak.
Stock markets globally rebounded after China cut a key lending benchmark to support its economy. Worries about slowing growth and high inflation have weighed on markets in recent weeks.
Canada is a major exporter of commodities, including oil, so the loonie is particularly sensitive to the global economic outlook.
US crude prices rose 0.1% to $112.34 a barrel, while the Canadian dollar was trading 0.3% higher at 1.2790 to the greenback, or 78.19 US cents.
The currency touched its strongest since May 5 at 1.2777. For the week, it was on track to advance 0.9%, after declining for seven straight weeks.
It follows domestic data on Wednesday showing that annual inflation rate rose faster than expected in April, raising pressure on the Bank of Canada to tighten policy quickly.
The central bank is likely to be among the first of the major central banks to lift interest rates to a more normal setting even as worries persist about record-high levels of household debt. Its next policy decision is due on June 1.
Canadian government bond yields were mixed across the curve, with the bond market set to close early ahead of the Victoria Day holiday on Monday.
The 10-year dipped about half a basis point to 2.875%, after touching on Thursday its lowest intraday level in nearly three weeks at 2.830%.
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