By Fergal Smith
TORONTO (Reuters) - The Canadian dollar strengthened against the greenback on Thursday as U.S. bond yields stabilized and Ontario, Canada's most populous province, said it would soon ease restrictions to curb the spread of the Omicron coronavirus variant.
The loonie was trading 0.3% higher at 1.2472 to the greenback, or 80.18 U.S. cents, after trading in a range of 1.2454 to 1.2516.
Among G10 currencies, only the Australian dollar notched a bigger gain. Both Canada and Australia are major producers of commodities.
"Interest rate differentials are tilting against the (U.S.)dollar, lifting the appeal of currencies leveraged to rest-of-world growth," said Karl Schamotta, chief market strategist at Corpay.
U.S. Treasury yields have pulled back from 2-year highs as data showed that the number of Americans filing new claims for unemployment benefits unexpectedly rose last week.
Ontario has blunted transmission of the Omicron variant and it will gradually ease restrictions on businesses from end-January, Premier Doug Ford said.
Despite the prospect of slower economic growth due to restrictions, investors have raised bets that the Bank of Canada will hike interest rates on Jan. 26. It would be the first hike since October 2018.
Data from payroll services provider ADP showed that Canada added 19,200 jobs in December, the fifth straight month of gains
Canadian retail sales data, due on Friday, could offer more clues on the strength of the domestic economy.
The price of oil, one of Canada's major exports, settled 0.1% lower at $86.90 a barrel as U.S. crude inventories rose for the first time in eight weeks and investors took profits after a recent rally.
Canadian government bond yields were mixed across a flatter curve. The 10-year eased 2.4 basis points to 1.857%, after touching on Wednesday its highest intraday level since March 2019 at 1.905%.
(Reporting by Fergal Smith; Editing by Jonathan Oatis and Sandra Maler)