Canadian dollar firms as sentiment buoyed by U.S. budget talks

Mon Dec 17, 2012 10:59am EST
 

By Solarina Ho

TORONTO (Reuters) - The Canadian dollar strengthened against the greenback on Monday after earlier touching a one-week low, as some optimism over U.S. budget talks helped support the commodity-linked currency.

The first real movement in talks over the so-called fiscal cliff began on Sunday, with Republican House Speaker John Boehner edging closer to President Barack Obama's demands on taxation.

"The general undertone for the day seems to be optimism on budget talks. John Boehner did agree to raise rates on the wealthy in exchange for entitlement cuts. That's a big move in terms of the standoff," said Rahim Madhavji, President at Knightsbridge Foreign Exchange.

"That optimism is just carrying through in the market today ...(the Canadian dollar) has been grinding higher, but it does need a catalyst to continue. The market undertone is still the same as over the last week."

At 9:55 a.m. (1455 GMT), the Canadian dollar stood at C$0.9844 versus the U.S. dollar, or $1.0158, compared with C$0.9865, or $1.0137, at Friday's North American session close.

Camilla Sutton, chief currency strategist at Scotiabank saw U.S. dollar resistance against Canada's at the 100-day moving average at C$0.9893 and support around C$0.9832.

Earlier, the currency touched C$0.9882, or $1.0119, its weakest level since December 10.

"There doesn't really seem to be any specific news that would justify that, so it seems like it's probably flow driven, which I would suggest implies that it does fade," said Sutton, adding that the U.S. budget talks were helping risk sentiment in other currencies.   Continued...

 
A man holds the new Canadian 100 dollar bill made of polymer in Toronto November 14, 2011. REUTERS/Mark Blinch