Canada dollar touches seven-week high after takeover approvals

Mon Dec 10, 2012 5:01pm EST
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar broke through recent trading ranges to hit a seven-week high against the greenback on Monday after the Canadian government gave the green light to two controversial takeovers in the energy sector.

Canada approved CNOOC Ltd (0883.HK: Quote) of China's $15.1 billion bid for Nexen Inc NXY.TO and the $5.3 billion takeover of Progress Energy Resources Corp (PRQ.TO: Quote) by Malaysia's Petronas PETR.UL, but it also announced new rules that will curb investments by state-owned enterprises.

"If we compare (the Canadian dollar) to the value last week, the approval on Friday of the two big takeovers - that has been helping the Canadian dollar gain some strength," said Charles St-Arnaud, economist and currency strategist at Nomura Securities in New York.

"But in the medium to long term, the higher hurdle for takeovers by state-owned enterprises may at the margins be negative".

Market sources noted that by drawing a line in the sand against future acquisitions in the Alberta oil sands by foreign state-owned enterprises, the Canadian government could be seen by some as raising hurdles for takeovers in general.

"I think any flow associated with that transaction is CAD positive but I think it is right to not go overboard on the forward-looking implications beyond that because of that very strong qualification that went with it," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.

The Canadian dollar finished Monday's session at C$0.9870 versus the U.S. dollar, or $1.0132, compared with Friday's North American session close of C$0.9910, or $1.0091.

Earlier on Monday, the currency hit C$0.9865, or $1.0137, its strongest level since October 19.   Continued...