Canada dollar firms on U.S. data, but rate view limits gain

Wed Oct 17, 2012 11:15am EDT
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By Alastair Sharp

TORONTO (Reuters) - The Canadian dollar firmed against the U.S. currency on Wednesday after data showed the budding recovery in the U.S. housing sector is gaining traction.

Spain's avoidance of a rating downgrade also boosted sentiment, though gains were limited by a recent speech by Bank of Canada Governor Mark Carney, which investors have interpreted as being less hawkish on interest rates.

The Canadian currency hit C$0.9818 to the U.S. dollar, or $1.0185, soon after the release of data showing groundbreaking on new U.S. homes in September surged at its fastest pace in more than four years.

Evidence of a recovery in the U.S. housing market helped the Canadian dollar because most of the country's exports, from building materials to oil, go to its southern neighbor.

The currency held most of its gains by 10:43 a.m. (1443 GMT), trading at C$0.9822 to the greenback, or $1.0181, compared with C$0.9868 at Tuesday's North American close.

Still, some traders noted the move higher was less sharp than it could have been and said the currency could struggle to move past C$0.9810.

"Unless we see asset markets really box on in a major way from here, the reaction to what were very good numbers suggests that we're in for a day of consolidation," said Shane Enright, executive director of foreign exchange sales at CIBC World Markets.