Canadian dollar firms on China rate cut, but Fed weighs

Thu Jun 7, 2012 1:24pm EDT
 
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By Jon Cook

TORONTO (Reuters) - Canada's dollar advanced for a fourth straight session against its U.S. counterpart on Thursday, boosted by China's surprising interest rate cut, but momentum was curbed when the U.S. Federal Reserve signaled further monetary stimulus was not imminent.

The U.S. dollar gained against the euro after Fed Chairman Ben Bernanke dampened expectations that the central bank will embark sometime soon on further measures to boost the U.S. economy.

China's rate cut to shore up its flagging economy boosted global stocks and lifted growth-linked currencies in Canada, New Zealand and Australia. The Australian dollar hit a three-week high, while the Canadian dollar climbed to C$1.0210 against the greenback, or 97.94 U.S. cents, its strongest level since May 29.

"The China news certainly helps and suggests that they will do whatever they can to maintain decent growth, and that's solid for commodity prices and the Canadian dollar," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets.

"If Bernanke had signaled more easing it would have wet risk appetite and weakened the U.S. dollar, but we didn't quite get that far."

Hopes of more stimulus were offset somewhat by positive U.S. data on Thursday that showed the number of Americans lining up for new jobless benefits fell last week for the first time since April.

At 1:05 p.m. EDT (1705 GMT), the Canadian dollar was at C$1.0243 against the U.S. currency, or 97.63 U.S. cents, up from Wednesday's close at C$1.0279 against the U.S. dollar, or 97.29 U.S. cents.

News in Europe was also upbeat, as Spain soothed fears that it is being cut off from financial markets by raising more than 2 billion euros ($2.5 billion) at a bond auction, although it had to pay dearly.   Continued...