Canadian dollar edges higher on central bank hopes

Tue Sep 4, 2012 9:42am EDT
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar tested recent highs against the U.S. currency on Tuesday, helped by hopes the U.S. and European central banks will take action to boost their economies, with an election in the province of Quebec providing little direction.

French-speaking Quebec is heading to the polls today and the province's separatist Parti Quebecois is expected to return to power.

"Surprisingly enough, very few people are talking about that ... I thought it might have more of an impact, but it seems like the market is very complacent about it," said David Bradley, director of foreign exchange trading at Scotiabank.

Instead, the Canadian currency took its cues from abroad.

The euro hovered near a two-month high against the U.S. dollar on optimism the European Central Bank will unveil steps to tackle the region's debt crisis this week. The ECB is meeting this week to decide on a bond-buying scheme to help lower Spanish and Italian borrowing costs.

The Canadian dollar closed at its strongest level since April on Friday after Federal Reserve Chairman Ben Bernanke said the U.S. central bank would take stimulus action as needed and after data showed the Canadian economy grew at a quicker pace than expected in the second quarter.

At 9:08 a.m. EDT (1308 GMT) the Canadian dollar was at C$0.9851 versus the U.S. dollar, or $1.0151, stronger than Friday's North American session close of C$0.9857, or $1.0145.

Earlier in the session, it touched C$0.9843, or $1.0160, matching the high of last week, which was also the strongest level since May.   Continued...