Canada dollar strengthens on positive U.S. budget talks

Wed Nov 28, 2012 4:47pm EST
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar firmed against the U.S. dollar on Wednesday as market sentiment improved on hopes that a deal can be reached on the U.S. "fiscal cliff".

President Barack Obama said he hopes he can reach agreement with Congress before Christmas to shrink the U.S. budget deficit and forge an agreement to avoid a package of tax increases and spending cuts scheduled to kick in at the end of the year that threaten a U.S. recession.

U.S. House Speaker John Boehner, an Ohio Republican, said he is willing to put revenues on the table if accompanied by spending cuts.

"Risk appetite is better. The fiscal cliff seems to be moving toward a resolution," said Adam Button, currency analyst at ForexLive in Montreal, who added that the optimism should help the Canadian dollar strengthen through C$0.99, or $1.01, in the near future.

"The fuse may not be lit on the fiscal cliff in the way in the way we thought it might be ... It's early on, admittedly, but it looks at this point it could be a relatively painless decision."

The Canadian dollar finished the North American session at C$0.9919 to the U.S. dollar, or $1.0082, stronger than Tuesday's finish at C$0.9947, or $1.0053.

Earlier in the session, the currency touched C$0.9962, its weakest level this week against the greenback, before strengthening. "That tells me there's a strong appetite to buy Canadian dollars as we approach parity," Button said.

The currency has been trading between C$0.9875 and C$1.0057 for more than a month.   Continued...