Canada dollar rises as Bank of Canada keeps rate-hike stance

Wed Jul 18, 2012 4:33pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar rose against its U.S. counterpart on Wednesday, boosted by broad firmness in global equities and as the Bank of Canada kept its rate-hike stance while most other major advanced economies are moving in the opposite direction.

The currency rose to C$1.0101 versus the greenback, or 99.00 U.S. cents, its strongest level since July 5, as Governor Mark Carney defended its position by saying Canada cannot "cut and paste" monetary policy.

"We've weathered the storm a lot better than most other countries, especially in Europe and the States. The market is still taking his comments that rates will have to go up some time as a positive," said David Bradley, director of foreign exchange trading at Scotiabank.

" The Canadian dollar is benefiting from that purely from a yield play."

The Canadian dollar ended at C$1.0107 versus its U.S. counterpart, or 98.94 U.S. cents, up from Tuesday's finish at C$1.0126 or 98.76 U.S. cents.

Also supporting the currency was a move higher in global equities, with the S&P 500 .SPX hitting its highest level since early May on Wednesday as corporate profits from bellwethers like Intel (INTC.O: Quote) and Honeywell (HON.N: Quote) defied the market's fears about global growth. .N

Equities were also supported by optimism Federal Reserve Chairman Ben Bernanke may act to stimulate the U.S. economy if needed, underscoring his concerns especially in the job market.

But stocks diverged from other asset classes. The euro fell broadly on Wednesday after comments by German Chancellor Angela Merkel reignited worries about the euro zone debt crisis and government bond prices rose over fears of slow economic growth.   Continued...

Images of the front and the back of the new Canadian 50 dollar bill, made of polymer, are seen on display before a news conference in Quebec City, March 26, 2012. REUTERS/Mathieu Belanger