Canada dollar rallies to 3-1/2-month high

Tue Aug 21, 2012 9:52am EDT
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By Claire Sibonney

TORONTO (Reuters) - The Canadian dollar climbed to a three-and-a-half-month-high against the U.S. dollar on Tuesday, tracking global equities, commodities and other commodity-driven currencies higher as a stream of encouraging headlines lifted sentiment.

The Australian and New Zealand dollars got a boost after the Reserve Bank of Australia sounded content with policy where it was, while talk of stimulus measures in regional China underpinned risk appetite.

Meanwhile, talk the European Central Bank will take strong action to ease Spanish and Italian borrowing costs was also being telegraphed to markets. <MKTS/GLOB>

"I would say there isn't one catalyst but a slew of catalysts which have helped the risk rally," said Camilla Sutton, chief currency strategist at Scotiabank.

She cautioned however that near term, the currency's recent surge could be overdone.

"Anything we measure it against, all the fundamental drivers for CAD are positive for CAD which is good, however if we look at it on any of the charts, it's really overstepped its rally," added Sutton, noting correlations to oil and other commodities, and interest rate spreads.

At 8:19 a.m., Canada's dollar was at C$0.9861 versus the U.S. dollar, or $1.0141 U.S. cents, firmer than Monday's North American session close at C$0.9884 versus its U.S. counterpart, or $1.0117.

The Canadian dollar hit an intraday high of C$0.9852, or $1.0150, its firmest level since May 3.   Continued...

The new Canadian 20 dollar bill made of polymer is displayed at the Bank of Canada in Ottawa May 2, 2012. REUTERS/Chris Wattie