Canadian dollar gains in holiday-thinned trade

Mon May 28, 2012 4:47pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar climbed against its U.S. counterpart on Monday, recovering from a four-and-a-half month low hit in the previous session, as Greek polls showed growing support for pro-bailout parties.

Global share markets recovered overnight from steep falls last week, when investors fled to the safety of the U.S. dollar on mounting concerns about Greece, Spain's banking sector, and a lack of immediate policy responses from European leaders. <MKTS/GLOB>

"The positive news out of Europe caused a bit of demand for the Canadian dollar and other risk-based assets," said Blake Jespersen, a managing director of foreign exchange sales at BMO Capital Markets.

Greek opinion polls pointed to gains for the conservative New Democracy party in the June 17 election, making it more likely the next Greek government will stick to bailout terms agreed with the European Union and the International Monetary Fund, enabling Greece to stay in the euro.

"The pro-bailout party is gaining traction and is leading in the polls so the market viewed that as a positive," said Jespersen.

The Canadian dollar ended at C$1.0238 versus the U.S. dollar, or 97.68 U.S. cents, stronger than Friday's North American session close at C$1.0295 against the U.S. dollar, or 97.13 U.S. cents.

The Canadian dollar outperformed many of its G10 currency peers, including the euro and Japanese yen. It underperformed its commodity-linked cousins, the New Zealand and Australian dollars.

"The market has decided to stop catastrophizing Greece ... and the market is taking that as a catalyst perhaps to start pulling back on its extreme long (U.S.) dollar positioning," said Jack Spitz, managing director of foreign exchange at National Bank Financial.   Continued...