Canadian dollar above 82 cents US and getting stronger

The Canadian dollar closed above 82 cents US on Friday after a week in which strengthening oil prices drew the currency higher.

The loonie ended the day at 82.15 cents US, off one fifth of a cent, after hitting a peak of 82.61 earlier in morning.

It's been strengthening along with oil, which has seen rising prices since the beginning of April.

On Friday, the West Texas Intermediate crude contract was trading at $57.21 US a barrel, down from its high over $58 on Thursday.

But Brent crude continued a climb that has seen it up two per cent this week, hitting $65.34 US at the close of trading. It's now up 14 per cent on the year.

There are further signs Friday of slowing production in the U.S. oilpatch. 

The number of rigs drilling for oil in the U.S. declined again this week, according to oilfield services company Baker Hughes Inc. There were 703 active U.S. rigs, down by 31. In Canada, there were 79 rigs, down by one from last week.

Morgan Stanley has said that the count will bottom in about three months.

Weakness in the U.S. dollar is partly responsible for the loonie's rise, according to foreign exchange trader Rahim Madhavji of Knightsbridge FX.

"The rise in oil prices and overall more positive outlook from the Bank of Canada are the main catalysts combined with a lack of momentum in the U.S. dollar," he said in a note to investors.

"Oil prices are in the high $50s, significantly higher than the mid $40ss earlier this year and oil prices seem to have stabilized, which is positive for the Canadian economy. If [Stephen] Poloz keeps singing the more positive tune and oil prices continue to move higher, look for the Canadian dollar to continue to rally."

At the beginning of this week, Bank of Canada governor Poloz signalled another rate cut was unlikely, helping to reassure markets.

He also gave a more upbeat assessment of the Canadian economy last week, saying the impact of low oil prices is likely to be short-lived and there would be GDP growth in the second half of the year.

The strong U.S. dollar has been blamed for poor corporate results in the first quarter, as American products become more expensive overseas. The prospect that interest rate hikes by the Fed might be put off until September have helped undercut the U.S. currency.